Oil Traders Cautiously Bullish as Prices Hit October Highs

Crude oil futures reached their highest levels since October earlier this week, and the momentum wasn’t slowing as of Friday morning.

WTI and Brent were trading at $74.58 and $77.59 respectively at the time of writing, with traders assessing the interplay of seasonal demand, supply constraints, and mixed inventory data as the week draws to a close. Despite the recent rise in prices, traders remain cautious about balancing tightening supply and uncertain demand signals.

Supply Constraints Drive Upward Pressure

Supply-side factors were critical in shaping crude oil’s price movements this week. OPEC production dropped by 50,000 barrels per day (bpd) in December, largely due to maintenance in the UAE and declining Iranian output. These reductions align with OPEC+’s broader commitment to cut production, ensuring supply remains constrained. Saudi Arabia and Iraq maintained steady production levels, adhering to the cartel’s strategy to limit global availability.

Adding to the supply squeeze, Western sanctions on Russian crude shipments continued to bite. Efforts by the Biden administration to restrict Russian exports, coupled with expectations of a 300,000 bpd decline in Iranian production, amplified concerns over global supply. These geopolitical factors have reinforced support for prices, even as demand uncertainties loom.

Winter Weather Fuels Seasonal Demand

Colder-than-expected weather across the U.S. and Europe has sharply increased demand for heating.