Oil rises 1% as demand for fuel rises due to cold weather

Oil prices rose by more than one percent on Thursday, with parts of the United States and Europe affected by cold weather, which pushed demand for fuel during the winter to rise.

Price movements

Brent crude futures rose 82 cents, or 1.08 percent, to $76.98 per barrel by 11:41 EST, and US West Texas Intermediate crude futures rose 73 cents, or one percent, to $74.05.

Brent crude advanced by more than a dollar during the session.

The two benchmarks lost more than 1 percent yesterday, Wednesday, under pressure from the rise in the dollar and a larger-than-expected increase in US fuel inventories.

“Today’s rise is definitely an increase in winter fuel demand here in the United States,” said John Kilduff, partner at Again Capital in New York.

The National Weather Service said parts of eastern Texas to northern Kentucky were under a winter storm warning today, covering large areas of Arkansas and Tennessee.

The US Energy Information Administration said yesterday, Wednesday, that crude consumption in refineries rose by 45,000 barrels per day in the week ending January 3, while refinery operating rates jumped 0.6 percentage points to 93.3 percent.

The administration stated that refineries located on the US Gulf Coast raised their net inputs of crude oil to their highest levels since December 2018.

JP Morgan analysts expect oil demand in January to rise by 1.4 million barrels per day on an annual basis to 101.4 million barrels per day, driven mainly by increased demand for heating fuel in the Northern Hemisphere.

“Global oil demand is expected to remain strong throughout January, supported by colder-than-normal winter conditions boosting heating fuel consumption, as well as an early start to travel activities in China for the Lunar New Year holiday,” analysts said.

Trading activity in Brent crude futures indicates that traders have become more concerned about the shortage of supply in conjunction with the rise in demand.

The dollar rose further on Thursday, supported by a rise in US Treasury bond yields and amid anticipation for Trump’s return to the White House on January 20.

WTI is expected to fluctuate in a range of $67.55 to $77.95 in February as the market waits for more clarity on the Trump administration’s policies and new fiscal stimulus measures in China, said Kelvin Wong, chief market analyst at OANDA.