Cold Weather and Geopolitical Tension Push Oil Prices Higher

The oil market is poised for a significant third consecutive week of gains, propelled largely by the cold weather gripping various regions of the United States and Europe. As temperatures plunge, fuel demand is inevitably on the rise, and traders are keenly watching these developments.

JPMorgan analysts believe that the recent rise in oil prices is driven by three key factors: concerns over supply disruptions due to sanctions on Russia and Iran, falling oil reserves, and cold weather pushing up demand for heating. The National Weather Service predicts a cold spell in the central and eastern U.S., while Europe is also facing a cold snap, increasing demand for heating oil.

JPMorgan forecasts global oil demand could rise by about 1.6 million barrels per day in the first quarter of 2025, mainly due to higher demand for heating oil, kerosene, and LPG. Traders should stay alert to these trends in the energy sector.

Additionally, the price gap between the front-month and six-month Brent contracts is at its highest since August, indicating possible supply restrictions. Despite a strong U.S. dollar, which usually lowers oil prices, crude oil remains strong.

With the U.S. preparing new sanctions on Russia to support Ukraine, further supply constraints are expected. Traders are also closely watching how President-elect Donald Trump will handle relations with Iran, adding another layer of uncertainty. As Asian buyers seek alternative crude sources due to tighter sanctions, these issues are likely to continue impacting the market.