The gap between WTI and Brent crude oil prices widened further with the spread falling to -19.02 yesterday, the lowest level since November 2011. Two reasons were attributable to the phenomenon: Abnormal weather in Europe and intensification of tensions between Iran and the West. Apart from Iran, disruption of oil production in South Sudan and Nigeria increases risks in oil supply.

Temperatures have declined sharply across Europe with snow blanketing London and falling in Italy. Temperature in some parts of Kazakhstan has plummeted to as low as -50C while that in Russia has dropped to -30C. Heating demand has surged, sending UK natural gas prices high by +27%. While weather conditions have turned exceptionally cold in Europe, they remained moderate at the other side of the Atlantic. This is probably a reason for WTI and Brent to trade in opposite directions.

The US deepened sanctions on Iran, giving banks new powers to freeze assets linked to the Iranian government and closing loopholes that might have allowed the Middle East country to move money despite earlier sanctions. In January, the EU announced to impose embargo on Iran's oil. The moves triggered retaliation from Iran officials who threatened to stop oil supply to some European countries immediately. However, many people doubted the effectiveness of the sanctions. Israel blamed that imposing more sanctions is the same as giving Iran more time to move its nuclear developments underground and there will be no way to be detected later. Israel signaled last week that it might consider a military intervention in Iran but this was opposed by the US.

Elsewhere, oil production in South Sudan remained suspended amid disagreements on oil transfer fees. Moreover, South Sudan accused Sudan of stealing southern oil coming through its pipeline. Protests in Syria and Yemen have kept oil production in the 2 countries offline. In Nigeria, the Movement for the Emancipation of the Niger Delta (MEND) resumed attacks in the Niger Delta after ceasefire for a year. A pipeline owned by Eni SpA was bombed, resulting in a loss of around 4K bpd of oil. Although the amount lost is insignificant, MEND's attack posits a threat of disruption in oil production in the region.

On the dataflow, the US lacks economic releases today, therefore, the focus will be on Germany's industrial production which probably stayed flat in December, following a -0.6% slide a month ago. Canada's building permits might have risen +0.8% m/m in December after a -3.6% contraction in November.