By Konstantinos Chrysikos

Crude oil futures rose on Friday but remained volatile after a recovery during the last few weeks. The market continues to find support from the concerns around tightening supply and improving demand expectations. US sanctions on Russian oil producers and tankers have constrained supply and could continue to drive the market to the upside. Adding to the bullish momentum, colder weather in the US and Europe is expected to increase heating fuel demand, potentially supporting oil prices over the short to medium-term. Additionally, comments from Federal Reserve Governor Christopher Waller, suggesting potential interest rate cuts amid easing inflation, have also lifted sentiment. Stronger-than-anticipated Chinese economic data could also help improve expectations. China recorded higher-than-expected GDP growth rate and industrial production, which could revive hopes of stronger oil demand.

However, decreasing geopolitical tensions in the Middle East could weigh on crude prices. Developments in the Red Sea, where the Houthi militia is expected to halt attacks on ships following a ceasefire agreement, have eased concerns over global shipping disruptions. This could help mitigate potential supply bottlenecks and reduce uncertainty. As traders continue to monitor these factors, the market remains focused on broader supply and demand dynamics, with particular attention to the ongoing impact of sanctions on Russian oil and potential shifts in US monetary policy.

Chrysikos Head of Customer Relationship Management at Kudotrade