Fears of tighter Russian and Iranian supply due to escalating Western sanctions, let oil prices rebound from their previous declines. So Brent Futures were up 61 cents, to $76.91 while U.S.West Texas Intermediate (WTI) crude climbed 46 cents, to $74.02.
Sanctions have tightened oil supply, translating into better demand for Middle Eastern oil. This is reflected in Saudi Arabia’s decision to raise its February oil selling price to Asia and Europe, which marked the first price increase in three months.
According to Bloomberg’s Survey, OPEC oil production fell by 120 thousand barrels per day in December, primarily due to the United Arab Emirates exceeding its agreed production quota in recent months.
Additionally, surging demand for heating oil in the U.S. and Europe due to cold weather has contributed to boosting oil prices.
Extreme cold weather drives up demand
Oil prices tend to get higher in cold weather in the US and Europe, due to the higher demand for oil for heating purposes.
There is a natural phenomenon called the Polar vortex, when it is disrupted, it can lead to significant cold weather events in the U.S., while also dropping temperatures in Europe.
So traders have to take into consideration these factors also while trading on oil prices.
Weak economic data raises demand fears
Traders are also keenly studying the global economic data for signs of global growth.
In the Eurozone, the inflation accelerated in December, and prices went up a little. Even though this might not stop the European Central Bank from lowering interest rates, but would still be unwelcome.
The U.S. purchasing index data came weaker than expected, which raised concerns about a slowdown in business activity within the world’s largest fuel consumer. This suggests a less optimistic outlook for future oil demand
What factors influence the price of WTI Oil?
- Supply and demand are the key factors influencing the price of WTI Oil. and also global growth can be a driver of increased demand and vice versa for weak global growth, that’s why we discussed above that weak economic data can raise demand fears.
- Additionally, political instability and sanctions can impact supply and prices as well.
- The decisions of OPEC, a group of major Oil-producing countries, are another key driver of price.
- There is an inverse relationship between the US dollar and WTI Crude Oil prices. A weaker dollar typically supports oil prices as it becomes cheaper for holders of other currencies to purchase oil denominated in US Dollars.