Oil headed for third weekly gain on rising winter fuel demand

Falling temperatures spurring demand for heating fuel in US and Europe

A winter storm in Plano, Texas. A storm warning is in place as a cold front has brought freezing temperatures across the north of the US state. AFP

Oil prices rose on Friday and are headed for a third weekly gain while demand for fuel continued to increase as cold weather gripped parts of the US and Europe.

Brent, the benchmark for two thirds of the world’s oil, was trading 3.64 per cent higher at $79.72 a barrel at 7.47pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 3.83 per cent at $76.75 a barrel.

"Brent is on course for a third consecutive weekly gain, its longest such streak since July 2024,” Han Tan, chief market analyst at Exinity Group, told The National. “Oil bulls have been emboldened by the further drop in US crude inventories, while falling temperatures are spurring demand for heating fuels.”

Areas of the US have been hit by extreme cold this week. A major winter storm is expected to hit south-central and south-eastern states this weekend, with 2.5cm-15cm of snow expected for central Texas and much of Tennessee, the latest forecast by AccuWeather said.

This will create dangerous conditions on the roads as well as flight delays and cancellations from Dallas to Atlanta and Charlotte, it said.

Europe is also experiencing an extremely cold spell, with heavy snow in the UK leading to road, rail and airport closures.

Meanwhile, US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1 million barrels for the week ending January 3 compared to the previous week, indicating higher demand for oil, based on data from the Energy Information Administration.

At 414.6 million barrels, the US crude oil inventories are about 6 per cent below the five-year average for this time of year, the data said. However, further price growth may be restricted amid global economic uncertainties.

"Brent bulls’ quest to reclaim the $80 handle may be a stretch for the near term, given the potential for persistent Chinese economic weakness, global trade disruptions, more US supplies under President Trump and an even stronger US dollar," Mr Tan said.

Brent prices experienced a volatile year in 2024, from a low of about $69 a barrel to a high of $92. After a strong start to the year, prices weakened in the second half due to rising US interest rates and sluggish Chinese oil consumption.

Crude imports from China, the main engine of oil growth for nearly two decades, have shown signs of cooling amid a slowdown in its economy and the rapid adoption of electric vehicles.