Oil rises thanks to increased demand for diesel in scattered trading during the holidays by Reuters

Written by Shariq Khan

NEW YORK (Reuters) – Oil prices rose on Monday in thin late-year trading, with investors betting on lower temperatures across the United States and Europe in the coming weeks to boost demand for diesel.

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

US West Texas Intermediate crude gained 39 cents, or 0.6 percent, setting the settlement price at $70.99 per barrel. US low-sulfur diesel futures rose 2.5% to $2.30 per gallon, the highest level since November 5.

“Diesel prices lead the energy complex,” the trading desk of fuel distributor TACenergy wrote on Monday. Concerns about cold weather in the coming weeks will boost the use of diesel as an alternative to natural gas for 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 to the 399 estimated Friday, according to LSEG. The company’s meteorologists also expect temperatures to get colder in Europe in January.

US stocks rose 17% to their highest level since January 2023, supported by weather forecasts and rising demand for exports.

A preliminary poll conducted by Reuters on Monday showed that further support for oil prices may come from lower inventories, which are expected to have fallen by about 3 million barrels last week.

Brent crude and West Texas Intermediate crude rose about 1.4 percent last week, supported by a larger-than-expected decline in US crude inventories in the week ending December 20, with refiners intensifying their activity and the holiday season supporting fuel demand. (Environmental Impact Assessment/Environmental Assessment)

Investors are also awaiting the release of China’s factory PMI surveys, scheduled for Tuesday, followed by the US ISM survey on Friday, to gauge the economic health of the countries that consume the most oil.

Alex Hodes, an analyst at brokerage StoneX, said the weak Chinese economy could cause oil markets to become oversupplied next year.

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

Hodes said oil market participants also expect that US President-elect Donald Trump will reduce Iranian crude oil exports to less than 500,000 barrels per day through sanctions, withdrawing more than 1 million barrels of daily crude oil supply from the global market.