Oil prices concluded higher on Thursday, propelled by a larger-than-expected draw in U.S. crude supplies and optimistic demand forecasts, alleviating concerns about the demand outlook and prompting bullish market sentiment.
By 14:30 ET (19:30 GMT), U.S. crude futures were up 2.1% at $74.08 per barrel, while the Brent contract rose 1.5% to $79.03 per barrel.
Unexpected Draw in Crude Inventories
In a surprising turn of events, U.S. crude inventories declined by approximately 2.5 million barrels during the week ending Jan. 12, surpassing expectations of a draw of 331,000 barrels. This unexpected draw contributed to the positive momentum in oil prices.
Gasoline and distillates stockpiles, however, saw notable increases. Gasoline inventories rose by about 3.1 million barrels, exceeding expectations for an increase of around 2.2 million barrels. Distillate stockpiles also climbed by approximately 2.4 million barrels, compared to expectations of a rise of 880,000 barrels.
IEA and OPEC Optimism
The International Energy Agency (IEA) released its monthly report, projecting oil demand growth of 1.24 million barrels per day in 2024, an increase of 180,000 bpd from its previous estimate. The agency attributed this positive outlook to improved economic growth and lower crude prices in the fourth quarter.
OPEC maintained its bullish forecast for demand growth of 2.25 million barrels per day for 2024, further boosting market confidence.
Production Challenges Amid Extreme Winter Conditions
Extreme winter conditions in parts of the U.S., particularly in the oil-producing state of North Dakota, are anticipated to impact production. North Dakota announced a more than 50% reduction in output due to severely cold weather, contributing to an overall decline in U.S. production, which had reached record highs in the past two months.
The combination of the unexpected draw in crude inventories, positive demand projections, and production challenges due to extreme weather helped assuage concerns about weakening global economic conditions. Ongoing conflicts in the Middle East also continued to threaten supplies, adding further support to oil prices.