Oil News: Crude Prices Surge as Supply Risks Drive Bullish Momentum

Crude Oil Prices Surge on Supply Risks and Winter Demand

Crude oil futures posted strong gains on Friday, extending their rally to a third consecutive week. Prices found fresh momentum after crossing the 200-day moving average at $72.34 on January 2, with traders eyeing potential resistance levels at $77.36, $79.61, and $81.33 as bullish sentiment gains traction.

At 11:40 GMT, Light Crude Oil futures are trading $76.15, up $2.23 or +3.02%.

Sanctions on Russia and Iran Drive Supply Concerns

Market attention remains focused on the potential for tighter sanctions targeting Russia and Iran, which could significantly disrupt global oil supply. U.S. President Joe Biden is expected to announce new measures against Russia’s economy, heightening the risk of supply constraints. A primary focus has been on Russia’s oil industry, which has already faced restrictions in response to its involvement in the Ukraine conflict.

Ole Hansen, head of commodity strategy at Saxo Bank, emphasized the significance of sanctions, stating, “Longer term, the market is focused on the prospect of additional sanctions.” With inventories remaining tight, traders are increasingly positioning for further supply pressures.

Cold Weather Spurs Heating Fuel Demand

Harsh winter conditions in the United States and Europe are contributing to increased demand for heating fuels. The U.S. weather bureau has forecast below-average temperatures in central and eastern regions, while Europe continues to experience colder-than-normal conditions.

Analysts at JPMorgan project a global oil demand increase of 1.6 million barrels per day in the first quarter of 2025, driven by heightened consumption of heating oil, kerosene, and LPG. At the same time, the widening premium on front-month Brent contracts over six-month contracts points to tightening supplies, further supporting higher prices.

Rally Persists Despite Stronger U.S. Dollar

Crude prices have defied the strengthening U.S. dollar, which typically weighs on dollar-denominated commodities. The dollar has strengthened for six consecutive weeks, but inflation concerns and the threat of additional tariffs have bolstered oil’s appeal as a hedge against rising prices.

Optimism around China’s economic stimulus measures has also supported the market, with expectations of improved demand from the world’s second-largest oil consumer adding to the bullish sentiment.

Bullish Oil Prices Forecast on Firm Fundamentals

With supply risks intensifying and seasonal demand strengthening, crude oil prices appear positioned for further gains. The combination of geopolitical tensions, tightening inventories, and robust winter fuel demand suggests a bullish outlook in the short term. Key resistance levels at $77.36 and beyond could be tested, underscoring the continued upward momentum in oil markets.

More Information in our Economic Calendar.