Oil prices are set for a weekly increase driven by stronger-than-expected demand indicators in the US, expectations of higher global demand due to cold weather, and President Joe Biden’s ban on offshore drilling along most US coastlines.
The International benchmark Brent crude traded at $78.77 per barrel at 2.35 p.m. local time (1135 GMT) on Friday, up by around 3% relative to the closing price of $76.47 a barrel last week.
West Texas Intermediate (WTI), the American benchmark, traded at $75.44 a barrel at the same time on Friday, a rise of about 2.45% from last Friday’s session, which closed at $73.63 per barrel.
Weekly crude oil inventory data from the American Petroleum Institute (API) and the US Energy Information Administration (EIA) suggested strengthening demand in the US, the world’s biggest consumer.
API data indicated a decline of 4.02 million barrels, surpassing market expectations of a 250,000 barrel fall, while EIA reported a 1 million barrel drawdown for the week ending Jan. 3.
The price increase was further supported by market players’ anticipations of higher oil demand, driven by the impact of cold weather in the US and Europe.
Many US states and European cities are currently experiencing extreme weather, raising concerns about potential disruptions to oil production and refinery operations.
Data from EIA showed heating oil stockpiles in the US declined by 632,000 barrels for the week ending January 3.
Further, data showed US heating oil futures rose above $2.38 per gallon in January, driven by a decline in US crude inventories for the seventh consecutive week and a drop in seaborne exports from Russia to their lowest level since August 2023.
Further intensifying concerns over tightening global supply, reports that oil production in Russia and OPEC members remained weak in December contributed to the price increase.
The OPEC+ group, which consists of OPEC, led by Saudi Arabia, and non-OPEC oil-producing countries, led by Russia, implemented supply cuts of about 5.85 million barrels per day, including voluntary production cuts.
Oil prices also gained support from President Joe Biden’s announcement Monday that he is moving to ban new offshore oil and gas drilling along most US coastlines.
The executive action will prevent new oil and gas leasing across 625 million acres of US ocean.
Though president-elect Donald Trump vowed to quickly revoke outgoing president Biden’s ban on offshore oil and gas drilling, tempering further price gains.
