WTI Oil Climbs 6.9% in 3 Weeks: Cold Wave & Tight Supply Fuel the Surge
Oil prices keep going up, WTI up 6.9% in the last 3 weeks, Brent up 5.9%.
Freezing weather in US and Europe has increased demand for heating fuels like kerosene, LPG and heating oil. According to the US Weather Bureau, central and eastern states will be below average temperature, while Europe will be colder than usual winter.
JPMorgan expects 1.6 million barrels per day (bpd) year over year increase in global oil demand in Q1 2025, due to heating fuel demand and China’s positive economic signs. “The extreme cold and low global oil inventories suggests demand will remain high in the near term” JPMorgan said in a Friday note.
Supply Concerns Add to Market Tightness
Supply side is adding to the bullishness. The front month Brent premium to 6 month Brent is at its widest since August, indicating supply constraints as demand increases.
The oil rally has ignored a 6 week strengthening of the US dollar which normally would weaken crude prices as it makes purchases more expensive in non-dollar currencies. Analysts say this is due to geopolitical risks and sanctions on Russia’s energy sector.
New sanctions will be announced this week by the Biden administration to reduce Russian oil revenues as geopolitical tensions continue. This will add to supply disruptions before the Jan 20 handover to President-elect Trump.
WTI Technical Outlook: Momentum Intact
WTI crude hovers near $74.18, consolidating within a bullish channel. Immediate resistance lies at $75.19, followed by $76.12 and $76.82. On the downside, support stands at $73.68, with deeper levels at $72.84 and $71.79.
The 50 EMA at $73.68 underscores short-term bullish momentum, while the RSI remains neutral, signaling potential for further consolidation. A breakout above $75.19 could extend gains, while a failure to hold $73.68 may trigger a pullback toward the channel’s lower boundary at $72.84.
