HOUSTON (Reuters) – Oil prices rose more than 1% on Thursday as cold weather gripped parts of the U.S. and Europe, boosting winter fuel demand. Brent crude futures were up 98 cents, or 1.29%, at $77.14 a barrel by 1:10 p.m. EST. U.S. West Texas Intermediate (WTI) crude futures gained 84 cents, or 1.15%, to $74.16. On Wednesday, both benchmarks had fallen more than 1%.
The rise is "definitely" due to winter fuel demand kicking in here in the U.S., said John Kilduff, partner at Again Capital in New York.
According to the National Weather Service, parts of east Texas up to the north of Kentucky were under a winter storm warning, covering large portions of Arkansas and Tennessee.
"TACenergy’s trading desk wrote that ‘right now it appears that the ice will stay north of refinery row along the U.S. Gulf Coast, but power outages will be a concern as heavy rain and wind comes along for the ride.’ Meanwhile, Again Capital’s Kilduff added that ‘Yesterday we saw strong refinery run rates, refiners in the U.S. are clearly cranking out fuels of all stripes and that is also underpinning the crude oil market today.’"
Ultra-low sulfur diesel futures were trading at around $2.39 a gallon, their highest since Oct. 8, according to data from LSEG. Refinery crude runs rose by 45,000 barrels per day (bpd) in the week to Jan. 3, as reported by the Energy Information Administration (EIA). Utilization rates climbed by 0.6 percentage points to 93.3%.
The EIA stated that refiners along the U.S. Gulf Coast raised their crude oil net inputs to the highest levels since December 2021.
Meanwhile, TACenergy’s trading desk highlighted the "significant impact of power outages" on refining operations across the U.S., particularly in Texas and California.
Analysts noted that the strong demand for heating oil and jet fuel ahead of winter is driving the price increases. However, supply constraints remain a concern, with OPEC+ production cuts still affecting global markets.
The benchmark Brent crude futures were up 98 cents at $77.14 bbl, while WTI futures gained 84 cents to $74.16 bbl on Thursday. Both contracts had declined over 1% the previous day due to weaker demand and supply concerns.
In Europe, prices were mixed as colder weather in the U.K., Germany, and France led to increased demand for heating oil, though the impact on fuel prices was limited by strong supply from the continent’s neighbors.
The U.S. Department of Energy reported that U.S. refining capacity utilization stood at 89.3%, up from 87.5% a week earlier. However, concerns about production cuts from OPEC+ and Russia persist, with some analysts warning of further volatility in coming weeks.
In summary, the combination of cold weather driving demand for winter fuels and supply constraints is expected to keep oil prices stable or slightly higher in the near term. Traders will be closely monitoring developments in both regions as the heating season ramps up.