Crude Oil Futures Hold Gains as Arctic Blast Spurs Energy Demand

by Joy

Crude oil futures continued to consolidate gains on Friday, with market participants anticipating a surge in energy demand due to an impending Arctic blast across Europe and the U.S.

As of 08:40 GMT, March 2025 ICE Brent futures were trading at $75.89 per barrel, just slightly below Thursday’s close of $75.93. This represents a near three-month high. Similarly, February 2025 NYMEX West Texas Intermediate (WTI) futures stood at $73.12 per barrel, marginally down from Thursday’s close of $73.13, as both benchmarks break above the recent trading range for Q4.

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Both contracts are also on track to register their second consecutive weekly increase.

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Arctic Conditions to Drive Energy Demand

AccuWeather meteorologists are warning of a series of cold waves hitting the U.S., with Arctic air potentially moving further south, which could lead to a major spike in energy demand. There is also the risk of freeze-related damage, particularly in southern states.

Paul Pastelok, Lead Long-Range Expert at AccuWeather, stated, “This could end up being the coldest January since 2011 for the U.S. as a whole.” The frigid temperatures are expected to drive heating demand, further tightening the oil market.

Meanwhile, Europe is bracing for similarly extreme cold, which coincides with a reduction in Russian pipeline gas supplies via Ukraine. This has driven up TTF (Title Transfer Facility) gas prices by 25% over the past two weeks, exacerbating the pressure on energy markets.

Market Reacts to Weather and Inventory Data

Despite relatively disappointing inventory data from the U.S. Energy Information Administration (EIA), forecasts of colder weather have kept oil prices buoyant.

U.S. commercial crude stockpiles fell by 1.2 million barrels, a smaller decrease than the anticipated 2 million-barrel drop. However, inventories remain 5% below the five-year average for this time of year.

A more significant rise came in U.S. gasoline stocks, which surged by 7.7 million barrels, or 3.5%, to reach 231.4 million barrels, the largest increase in nearly a year. This was driven by weaker demand and increased domestic crude processing. According to Matt Smith, lead oil analyst at Kpler, “Post-holiday demand slump and strong refining have led to big builds in gasoline and distillates.”

U.S. distillate oil stocks also rose during the week of December 27, reaching a three-month high of 122.9 million barrels as refining activity remained robust.

China’s Economic Stimulus Boosts Oil Sentiment

Recent gains in oil prices are also attributed to renewed optimism surrounding China’s economy. Beijing has signaled a series of stimulus measures aimed at boosting domestic consumption, which analysts believe could support oil demand growth in 2025.

Alex Hodes, an analyst at StoneX, noted, “As China’s economic trajectory is poised to play a pivotal role in 2025, hopes are pinned on government stimulus measures to drive increased consumption and bolster oil demand growth in the months ahead.”

Conclusion

Crude oil futures continue to ride a wave of optimism driven by colder-than-expected weather in both the U.S. and Europe, along with a supportive outlook for oil demand in China. While inventory data was mixed, the outlook for stronger energy consumption this winter has kept prices near multi-month highs. With the cold weather set to fuel demand and China’s economic recovery on the horizon, market sentiment remains largely positive heading into 2025.

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