Petroleum futures have seen a sharp increase by midday Thursday, with technical charts suggesting that the next few hours of trading and the settlement could determine whether the trading range in 2024 transforms into a sustained uptrend.

There are several factors contributing to this surge. Firstly, meteorologists are predicting cold weather in the U.S., which, combined with tensions in the Middle East, could further drive up prices. The eastern two-thirds of the U.S. continent may experience wintry conditions next week, potentially impacting refineries and leading to increased demand for distillate molecules for winter burns.

The market is also closely monitoring Iran's recent seizure of an oil tanker in the Gulf of Oman. This event raises concerns about a wider conflict and warfare in the already volatile Middle East.

These factors have already triggered a rally of approximately $2 per barrel for crude oil. However, it is worth noting that despite this surge, both WTI and Brent crude have yet to surpass key resistance levels of $75 per barrel for WTI and $80 per barrel for Brent. Furthermore, historical data indicates that oil rallies in the morning often lose momentum before the settlement period, which has been the trend thus far in 2024.

As of midday Thursday, February WTI is trading at $73.41 per barrel, reflecting a gain of $2.04 per barrel. March Brent is up $1.94 per barrel, standing at $78.74 per barrel.

Cold Weather Boosts Demand for Gasoline and Diesel

Gasoline and diesel prices have seen brisk gains recently, thanks to the January maintenance at some of the largest Gulf Coast refineries. Gasoline stocks are expected to increase, although they may not reach the levels seen in the past two weeks with gains of 10 million barrels and 8 million barrels.

Gasoline: The price of February RBOB (Reformulated Blendstock for Oxygenate Blending) has risen by 6.15 cents per gallon to $2.1288 per gallon. Cash markets have also seen an increase, with prices rising by 5.5-7 cents per gallon East of the Rockies, and smaller gains of 4.5-6 cents per gallon out West.

Diesel: Diesel stands to benefit the most from the cold weather. The price of February ULSD (Ultra-Low Sulfur Diesel) futures has gone up by 8.53 cents per gallon to $2.6859 per gallon. The market is anticipating increased demand in mid-January, particularly for heating oil due to the cold weather. Additionally, if there are any natural gas interruptions in northern states, the market could experience even greater gains.

The cold temperatures have also reduced the disparity between regions with access to tidal water and inland bulk markets. Previously, Midwestern diesel prices were available at a discount of 40-45 cents per gallon below futures. However, this gap has now narrowed to 28-29 cents per gallon.

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