Oil prices are defying expectations as they continue to rise for the third consecutive week, driven by a mix of factors that have tightened supply. Cold weather has spurred increased demand for heating oil, while US stockpiles have decreased, and Russian oil flows have diminished. Additionally, the outgoing Biden administration's stricter regulations on vessels transporting Iranian oil have further constrained global supply. The market's backwardation, where current prices are higher than future prices, suggests expectations of tighter supply ahead.
Looking forward, the market faces potential headwinds. The incoming Trump administration may implement policies that could slow economic growth, potentially dampening future energy demand. OPEC+ plans to increase output in the second quarter, which could ease supply constraints. Furthermore, China's anticipated decline in crude demand may impact global demand forecasts. As of 02:20 on January 10, Brent crude is trading at $77.50, up from its last close of $76.92, reflecting a cautious optimism amid these complex dynamics.