Oil Prices Ease as Weak Economic Data Offsets Higher US Winter Storm Heating Demand

By Scott DiSavino

New York (Reuters) – Oil prices retreated from their recent highs on Monday as some bearish economic news from the United States and Germany offset bullish support from a weaker U.S. dollar and forecasts for increased heating demand due to a winter storm.

Table of Contents

Prices Decline Amid Volatility

After rising for five consecutive days, Brent futures fell 21 cents (0.3%) to settle at $76.30 a barrel, while U.S. West Texas Intermediate (WTI) crude declined by 40 cents (0.5%) to settle at $73.56.

Despite the declines, both crude benchmarks remained in technically overbought territory for the third day in a row. The ongoing volatility in oil prices has been driven by various factors, including expectations of more fiscal stimulus to revitalize China’s faltering economy.

Bearish Economic News from the United States and Germany

On Friday, Brent settled at its highest level since October 14, while WTI closed at its highest since October 11. However, new orders for manufactured goods fell in November amid weakness in demand for commercial aircraft, according to data from the Commerce Department’s Census Bureau.

In Germany, Europe’s largest economy, annual inflation rose more than forecast in December due to higher food prices and a smaller drop in energy prices compared to previous months. To combat rising inflation, central banks often boost interest rates, which can slow economic growth and demand for energy.

Bullish Support from Weaker U.S. Dollar and Heating Demand

Earlier in the day, crude prices rose as a winter storm marched across the United States, causing natural gas prices to spike 10%. Diesel futures also closed at their highest level since October 7.

Crude prices gained ground earlier in the session on a 1.1% slump in the U.S. dollar against a basket of other currencies following a newspaper report that President-elect Donald Trump was considering tariffs that would only be applied to critical imports. This development provided relief for countries expecting broader levies and made dollar-priced commodities like oil cheaper for buyers using other currencies.

Weaker Dollar Supports Oil Prices

However, the dollar pared much of its decline after Trump denied the newspaper report. A weaker U.S. currency makes dollar-priced commodities like oil cheaper for buyers using other currencies.

In China, the world’s second-largest economy, the yuan ended the domestic session at its weakest level in 16 months against the U.S. dollar due to trade concerns.

Increased Demand Expectations

Saudi Aramco, the world’s top oil exporter, raised crude prices for Asian buyers in February for the first time in three months, indicating firmer demand expectations.

Sudan lifted a nearly year-long force majeure on the transport of crude oil from its neighbor South Sudan to a port on the Red Sea after security conditions improved.

Market Analysis

"Oil markets have entered 2025 with balanced supply-and-demand fundamentals, but with prices being propped up by enduring geopolitical tensions," analysts at Eurasia Group said in a report. "As the year progresses, oil markets will probably continue to experience low demand growth that may be outpaced by new supply, especially from the U.S. and likely OPEC as well."

Conclusion

The mixed signals from economic news and market trends have resulted in volatile trade on Monday. Despite some bearish factors, bullish support from a weaker U.S. dollar and increased heating demand due to a winter storm have contributed to oil price stability.

Market Statistics

Brent futures fell 21 cents (0.3%) to settle at $76.30 a barrel.
WTI crude declined by 40 cents (0.5%) to settle at $73.56.
Open interest in WTI futures on the New York Mercantile Exchange soared to 1.933 million contracts on Friday, the most since June 2023.