Oil prices experienced a slight decline on Friday but remained poised to register an increase of nearly 4% for the week. This surge was propelled by the International Energy Agency’s upward revision of its 2024 oil demand forecasts and an unexpected reduction in U.S. stockpiles.
Brent crude oil futures dipped by 25 cents or 0.3% to $85.17 a barrel at 0533 GMT, following Thursday’s milestone crossing of $85 a barrel, a level not seen since November. Similarly, U.S. West Texas Intermediate (WTI) crude slipped by 22 cents or 0.3% to $81.04.
The IEA’s latest report, released on Thursday, elevated its outlook on 2024 oil demand for the fourth time since November, attributing the increase to Houthi attacks disrupting Red Sea shipping. According to the report, world oil demand is projected to rise by 1.3 million barrels per day (bpd) in 2024, marking an increase of 110,000 bpd from the previous month’s forecast. Additionally, the report indicated a slight supply deficit this year following OPEC+ members’ extension of cuts, reversing the previous surplus.
ANZ analysts highlighted expectations for a resurgence in U.S. oil refinery utilization, noting the resumption of refinery operations after January’s capacity shutdowns due to winter weather. They also observed an improvement in European refinery margins, indicating signs of a tightening market balance.
Despite the strengthening of the U.S. dollar, which typically makes crude more expensive for users of other currencies, oil prices received support this week. Ukrainian strikes on Russian oil refineries, resulting in a fire at Rosneft’s largest refinery, contributed to market jitters, while unexpected declines in U.S. crude oil stockpiles and gasoline inventories also buoyed prices.
On the demand side, the decision by China’s central bank to maintain a key policy rate unchanged suggested a continued focus on currency stability amid uncertainty over the timing of expected Federal Reserve interest rate adjustments. Lower interest rates tend to stimulate economic growth and oil demand by reducing consumer borrowing costs.
In the United States, although some indicators pointed to a slowdown in economic activity, Thursday’s data showing a larger-than-expected increase in producer prices last month suggested that the Federal Reserve may not consider initiating interest rate cuts before June.