By Shariq Khan
NEW YORK (Reuters) -Oil prices edged higher on Monday in thin late-year trade as investors bet on a drop in temperatures across the U.S. and Europe over the coming weeks to boost diesel demand.
futures rose 29 cents, or 0.4%, to $74.46 a barrel by 1:19 p.m. EST (1819). The more active March contract was at $74.29 a barrel, up 49 cents, or 0.7%.
U.S. West Texas Intermediate crude gained 69 cents, or 1%, to $71.29 a barrel. U.S. ultra-low sulfur diesel futures rose by nearly 3% to $2.31 a gallon, the highest since Nov. 5.
“Diesel prices are leading the energy complex,” fuel distributor TACenergy’s trading desk wrote on Monday. Concerns of colder weather in the weeks ahead are boosting diesel as a substitute for natural gas in space heating, TACenergy wrote.
Heating degree days, a measure of energy demand for space heating, are expected to rise to 499 over the next two weeks in the U.S., compared with 399 estimated on Friday, according to LSEG. Meteorologists at the firm also anticipate temperatures turning colder in Europe in January.
U.S. surged 17% to their highest level since January 2023, boosted by the weather forecasts and rising export demand.
Investors are also waiting for China’s PMI factory surveys, due on Tuesday, followed by U.S. ISM survey on Friday, to gauge the economic health of the top oil-consuming nations.
A weak Chinese economy could cause oversupply in oil markets next year, said Alex Hodes, analyst at brokerage firm StoneX.
Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to revive economic growth, Reuters reported last week.
Oil-market participants are also speculating that U.S. President-elect Donald Trump will cut Iranian crude oil exports to below 500,000 barrels per day through sanctions, taking over 1 million barrels of daily crude oil supply off the global market, Hodes said.
Both Brent and WTI rose about 1.4% last week buoyed by a larger-than-expected drawdown from inventories in the week ended Dec. 20 as refiners ramped up activity and the holiday season boosted fuel demand. [EIA/S]
