Oil prices are defying expectations as they continue to rise for a third consecutive week, driven by a mix of factors that have tightened supply. Colder weather has spurred increased fuel demand, while US oil stockpiles have decreased, indicating a tighter market. Additionally, reduced Russian oil flows and the outgoing Biden administration's stricter sanctions on Iranian oil vessels have further constrained supply. The market's backwardation, where current prices are higher than future prices, also points to a tighter supply situation.
Looking ahead, the return of Trump to the presidency could introduce policies aimed at reducing energy costs, although short-term geopolitical tensions may keep prices elevated. The upcoming updates from the IEA and OPEC next week could shift market sentiment, especially with OPEC+ planning to ease output curbs in the second quarter. Furthermore, China's weakening demand for crude, as indicated by its trade data, could exert downward pressure on prices later in the year.
As of 02:20 on January 10, Brent crude is trading at $77.50, up from its last close of $76.92. This marks a continuation of the recent upward trend, despite broader market expectations of a challenging year for oil.