Oil Prices Up 7.5% So Far in 2025

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Energy market analysts will get updates on U.S. price forecasts later this week, but crude oil prices by Monday had already surpassed the expected average for this year.

The U.S. Energy Information Administration (EIA) will release its monthly market report for January later this week. In its December report, the EIA forecast an average price for West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, at $69.12 per barrel for 2025.

In pre-market trading on Monday, WTI was trading closer to $78 per barrel, climbing 7.5% over the first few days of January, a trading period shortened by the end-of-year holidays.

Ole Hanson, the head of commodity strategy at Saxo Bank in Denmark, said the rally is in part due to an "exceptionally cold" January for parts of the United States, the world's largest economy.

So-called Winter Storm Cora posed a freeze threat to a handful of refineries in the central United States last week.

Refiners can make diesel and fuel oil, sought-after products during the cold. The weather forecast this week looks clear, apart from a severe cold snap in the Dakotas that could influence production in the Bakken shale formation.

Hanson added that crude oil inventories at Cushing, Oklahoma, the delivery hub for WTI futures, are at an 11-year low for this time of year. Apart from production and refining issues, tariff threats from incoming U.S. President Donald Trump on Canada and Mexico, the top two crude oil exporters to the United States, could jeopardize future inventories.

Elsewhere, the Treasury Department under departing U.S. President Joe Biden on Friday issued sanctions against more than 180 vessels known to have carried Russian crude oil, along with sanctions on Russian oil producers Gazprom Neft and Surgutneftegas.

"The United States is taking sweeping action against Russia's key source of revenue for funding its brutal and illegal war against Ukraine," Treasury Secretary Janet Yellen said.

Hanson, in a research note published Monday, said war-related sanctions are already priced into the market, but Friday's actions from the Treasury Department could incentivize the January rally further.

Separately, London oil broker PVM said Monday that any market shortage from U.S. sanctions would be covered by spare capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC).

"Unless Russian export volumes suffer discernibly, we suspect the effects of the new sanctions will be short-lived, not so much pricewise but timewise," wrote PVM's Tamas Varga.

In its Short-Term Energy Outlook report from December, the EIA said it expected global inventories would increase by 1.6 million barrels per day this year, with the bulk of that coming from producers outside of OPEC.

Crude oil prices were largely rangebound in 2024, with the EIA listing the average at $76.51 per barrel for WTI for the year. Revisions to that forecast are due out on Tuesday.

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