Oil prices soar on talk of extra Russian sanctions, cold weather

Oil prices soared Friday, on track for a third straight week of gains as cold weather in the US and Europe pushed up demand hopes, as traders focused on potential supply disruptions from more sanctions on Russia.

At 09:15 ET (14:15 GMT), Brent oil futures expiring in March rose 4% to $79.95 a barrel, while West Texas Intermediate crude futures rose 4.2% to $77.00 a barrel.  Cold weather sweeps across US, Europe 

An ongoing polar vortex caused cold weather in several regions of the U.S. and Europe, with snowstorms sweeping across the central U.S.

This pushed up bets that demand for heating fuels in the regions will increase and factor into higher crude demand. 

But cold weather is also expected to disrupt travel in the northern hemisphere. Recent data showed a series of strong builds in US oil product inventories, signaling that demand in the world’s biggest fuel consumer remained languid. 

Markets were also watching for more signals on stimulus in China, as recent inflation data showed little improvement in the economy. The Lunar New Year holiday in February is also expected to help spur increased travel demand in the country.  More sanctions on Russia - Reuters 

Sentiment was also boosted by a report from Reuters, citing a document, that the United States will impose some of the harshest sanctions on the Russian oil industry to date, designating 180 vessels, dozens of traders, two major oil companies and some top Russian oil executives.

The document, purported to be from the US Treasury, was being circulated among traders in Europe and Asia. Reuters could not verify the veracity of the document. Citu lifts average Brent price 

Citigroup (NYSE:C ) has revised higher Brent prices for the first quarter of 2025, citing potentially larger geopolitical impacts on Iran’s oil exports and cold weather boosting heating demand and hitting US oil supply.

“With prices potentially firmer until the Trump Administration takes office, we revise up average Brent prices from $65/bbl to $71/bbl for 1Q’25 as Chinese buyers have pulled back more than expected on buying Iranian oil,” Citi said. Strong dollar limits oil upside

These gains have occurred despite sharp gains in the dollar this week, as hawkish signals from the Federal Reserve saw traders brace for a slower pace of interest rate cuts in 2025. 

Additionally, the US economy unexpectedly added more jobs in December versus the prior month, as nonfarm payrolls  increased by 256,000 jobs last month after rising by a downwardly revised 212,000 in November. Economists had forecast an uptick of 164,000 roles.

Fed policymakers were also seen expressing some caution over protectionist and expansionary policies under President-elect Donald Trump, which could underpin inflation in the long term.

A strong dollar pressures crude demand by making oil more expensive for international buyers.

(Ambar Warrick contributed to this article.)

Source: Investing.com