Oil rises as diesel demand surges on weak holiday trade By Reuters

Written by Shariq Khan

NEW YORK (Reuters) – Oil prices remained higher on Monday in thin late trade as investors bet on a drop in temperatures across the US and Europe in coming weeks to boost diesel demand.

Futures rose 22 cents, or 0.3%, to settle at $74.39 a barrel. The more active March contract settled at $73.99 a barrel, up 20 cents.

US West Texas Intermediate crude gained 39 cents, or 0.6%, to settle at $70.99 a barrel. US ultra-low sulfur diesel futures settled 2.5% higher at $2.30 a gallon, the highest since Nov. 5.

“Diesel prices are the driving force behind energy performance,” fuel distributor TACEnergy’s trading arm wrote on Monday. Concerns about cold weather in the coming weeks are increasing diesel as a substitute for natural gas in the region’s heat, TACenergy wrote.

Heating degree days, a measure of energy demand for space heating, are expected to rise to 499 in the next two weeks in the US, compared to 399 estimated on Friday, according to LSEG. Meteorologists at the firm also expect temperatures to turn colder in Europe in January.

The US increased by 17% to its highest level since January 2023, boosted by the weather forecast and increasing export demand.

Further support for oil prices could come from falling stockpiles, which are expected to have fallen by about 3 million barrels last week, a preliminary Reuters poll showed on Monday.

Brent and WTI rose about 1.4% last week due to a larger-than-expected decline in US crude output in the week ended Dec. 20 as refineries increase activity and downtime increases fuel demand. (EIA/S)

Investors are also awaiting China’s PMI survey, due on Tuesday, followed by the US ISM survey on Friday, to assess the economic health of top oil-consuming countries.

A weak Chinese economy could cause oversupply in the oil market next year, said Alex Hodes, an analyst at trading firm StoneX.

Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds by 2025 to revive economic growth, Reuters reported last week.

Oil market participants also speculated that US President-elect Donald Trump would cut Iran’s crude oil supplies to less than 500,000 barrels per day through sanctions, taking more than 1 million barrels of crude oil supply daily on the world market, Hodes said.