Brent Crude oil (OIL) is gaining nearly 2% today, with the market pricing in improved fundamentals supported by geopolitics, colder temperatures and real concerns about supply disruptions and the impact of sanctions. The risk factors have nearly overshadowed broader economic uncertainty about China and Europe growth, and oil prices are trailing the dollar and US treasury bonds yields being on track for a third straight weekly gain after falling to near three-year lows in early December 2024.
- J.P. Morgan expects global oil demand to increase significantly by 1.6 million barrels per day year-on-year in the first quarter of 2025, mainly driven by higher demand for heating oil, kerosene and LPG
- Analysts estimated that for every degree Fahrenheit by which the temperature drops below the 10-year average for winter, it causes oil demand to increase by 113,000 barrels per day
- Additionally, this demand is being driven by colder weather than in the past two winters, both in Europe and the United States.
- The market is concerned that the latest sanctions imposed on Russia by the Biden administration could negatively affect supply.
- Russia's oil production in December fell below the OPEC+ target, to 8.971 million barrels per day of oil in the final month of 2024, 7,000 barrels per day less than agreed.
- The outgoing U.S. administration has conveyed that it will impose tariffs on tankers carrying Russian petroleum products above the $60 per barrel limit imposed by the U.S. and its European allies.
The risk of China and Iran?
- China's Shandong port group has issued a notice banning the unloading of oil from US-sanctioned oil vessels. The port is a key oil import hub on China's east coast and manages three major terminals.
- If such a ban is made permanent, it could increase transportation costs for independent refiners in Shandong, which are major recipients of sanctioned oil, and slow down crude imports into China. China's Foreign Ministry said it was unaware of the Shandong Port Group's decision to ban US-sanctioned ships from its ports.
- It is likely that Donald Trump will strengthen restrictions on Iranian oil exports once in power, potentially causing disruptions that could amount to up to 1 million barrels per day i.e. about 1% of global supply.
At its last meeting, OPEC+ postponed its plan to withdraw from joint production cuts in the wake of slowing global demand and rising US production last month. The organization, which supplies about half of the world's oil, decided to delay the production increase by three months and the full recovery of output by a full year, until the end of 2026. 
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appSource: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
