Oil prices rose slightly on Monday, driven by expectations of colder weather in the U.S. and Europe, which could increase diesel demand. Investors are betting that the drop in temperatures over the coming weeks will lead to higher heating demand, particularly for diesel, which is being used as a substitute for natural gas in space heating.
Brent crude futures climbed by 29 cents, or 0.4%, to $74.46 a barrel by 1:19 p.m. EST. The more active March contract increased by 49 cents, or 0.7%, to $74.29 a barrel. U.S. West Texas Intermediate (WTI) crude gained 69 cents, or 1%, to $71.29 a barrel. U.S. ultra-low sulfur diesel futures saw a significant rise of nearly 3%, reaching $2.31 per gallon, the highest level since November 5.
TACenergy’s trading desk noted that diesel prices are driving the broader energy market, with colder weather forecasts fueling demand. Meteorologists predict a rise in heating degree days in the U.S. over the next two weeks, suggesting higher demand for energy to heat homes. Forecasts also indicate colder temperatures in Europe in January, further supporting diesel prices.
Additionally, U.S. natural gas futures surged by 17%, reaching their highest point since January 2023, spurred by the colder weather outlook and rising export demand.
Market participants are also awaiting key economic data to assess the health of the world's largest oil-consuming nations. China’s PMI factory surveys are due on Tuesday, followed by the U.S. ISM survey on Friday. A weak Chinese economy could lead to an oil oversupply next year, according to analysts.
Concerns over the global oil supply have also intensified with speculation that U.S. President-elect Donald Trump may impose sanctions on Iranian oil exports, potentially reducing global supply by over 1 million barrels per day.
Both Brent and WTI rose by approximately 1.4% last week, supported by a larger-than-expected drop in U.S. crude inventories in mid-December.
