WTI price rises as cold weather and geopolitical tensions fuel higher demand expectations
WTI crude nears $74 on supply risks and colder weather
West Texas Intermediate (WTI) crude oil extended gains for the second consecutive session, trading around $73.90 per barrel during Friday's European trading hours. The price surge is attributed to an expected rise in heating fuel demand due to prolonged cold weather across the Northern Hemisphere.
The US Weather Bureau forecasted below-average temperatures in central and eastern parts of the country, while Europe braces for an unusually harsh winter, further supporting bullish sentiment.
USOIL price dynamics (Nov 2024 - Jan 2025) Source: TradingView.
Supply concerns and sanctions raise oil prices
Analysts at JP Morgan cited supply disruptions and tightening inventories as key drivers of the current uptrend. Concerns have heightened as US President Joe Biden plans to announce new sanctions targeting Russia’s oil revenues, aiming to weaken Moscow's financial footing before President-elect Donald Trump takes office.
These geopolitical tensions have further complicated oil trade flows, with Asian buyers seeking alternative suppliers to mitigate risks. ING analysts noted that uncertainty surrounding Trump’s policy toward Iran could provide additional support for oil prices.
Technical outlook signals cautious optimism
On the technical front, WTI crude oil hovers above the pivotal $73.20 level, with immediate resistance at $75.24 and further targets at $76.48 and $77.82. Support levels remain critical at $72.18 and $71.09. The 50-day EMA aligns closely with the pivot, reinforcing a bullish bias above this threshold, while the 200-day EMA at $71.01 offers broader market stability. The Relative Strength Index (RSI) indicates neutral momentum, leaving room for further breakouts or corrections.
With the combination of higher demand expectations and tightening global supply, market participants will closely monitor geopolitical developments and the impact of forthcoming sanctions on oil prices. A sustained close above $75.24 could signal further upside, while any breach below $73.20 risks deeper corrections.
In our previous analysis, we highlighted WTI's consolidation near $73 amid a stronger US dollar and inventory drawdowns. Today’s price action reaffirms the impact of weather-driven demand and geopolitical concerns on market sentiment.
