Oil is poised for a third consecutive weekly gain, marking its best streak since July, as tightening market conditions offset concerns about weak demand in China, the world’s largest importer. Brent crude, the global benchmark, climbed above $77 per barrel, and has gained around 1% this week.
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Why Is Oil on the Rise?
Meanwhile, West Texas Intermediate (WTI) (CM:CL) hovered near $75. A key driver of this rise in oil prices has been the sharp decline in crude inventories at the Cushing, Oklahoma hub, which have fallen to their lowest levels since 2014. Simultaneously, China’s consumer inflation continues to edge toward zero, underscoring the economic challenges faced by the Asian powerhouse.
A combination of factors has fueled oil’s upward trajectory. Cold weather has spurred increased demand for heating fuels, while dwindling U.S. stockpiles and reduced shipments from Russia have tightened supplies. Adding to the mix, President-elect Donald Trump’s anticipated policies are stirring market anxiety. His imminent return to the White House could heighten risks to Iranian oil exports and spark fears of a trade war, potentially disrupting energy flows.
Analysts Are Cautious about Rising Oil Prices
As oil prices rise, analysts remain cautious. A Bloomberg report quoted Chris Weston, head of research at Pepperstone Group, as saying, “The reduction in inventories, perception of lower Chinese demand for Iranian exports, and the cold snap that promises to see a sizable shift in demand for heating fuel has justified this move higher. However, the supply we’re now seeing into $75 suggests current levels are fair, with a hesitation to take this toward $80.”
Weston’s caution is echoed by market behavior. In fact, Brent’s prompt spread—the difference between two oil contracts and a key indicator of supply conditions—has widened to $0.70 per barrel in backwardation (a bullish pattern), compared to $0.29 a month ago.
As Trump’s inauguration approaches, speculation is rife over his first actions in office. Trump is expected to authorize drilling on new federal lands and impose tariffs on Canadian imports, potentially reshaping North America’s energy landscape.
What Are the Best Oil Stocks to Buy?
For investors interested in the oil sector, we have rounded up the best oil stocks to buy that Wall Street analysts are bullish or cautiously optimistic about, using the TipRanks Stock Comparison tool. Analysts appear to be particularly bullish about Chevron (CVX), ConocoPhillips (COP), and SLB (SLB).
