Mar 15 2024: Despite a slight dip on Friday, oil prices are set to close the week with a nearly 4% increase, driven by factors such as the International Energy Agency’s upward revision of its 2024 oil demand forecasts and an unexpected decline in U.S. stockpiles.
On Friday, Brent crude oil futures fell by 38 cents or 0.4% to $85.04 a barrel at 0751 GMT, following a surge above $85 a barrel on Thursday, marking its highest level since November. Concurrently, U.S. West Texas Intermediate (WTI) crude saw a decline of 35 cents or 0.4% to $80.91.
The IEA’s upward revision of its 2024 oil demand outlook, due to disruptions in Red Sea shipping from Houthi attacks, has contributed significantly to market sentiment. The agency now predicts a 1.3 million bpd increase in oil demand for 2024, up 110,000 bpd from the previous month. This, coupled with expectations of a slight supply deficit this year following extended cuts by OPEC+ members, has supported the bullish trend.
ANZ analysts have also pointed to the anticipated rise in U.S. oil refinery utilization, as refineries reopen capacities shut down in January due to adverse weather conditions. Furthermore, improving European refinery margins suggest a tightening market balance.
Despite a strengthening U.S. dollar, which typically makes crude more expensive for non-dollar currency users, oil prices were buoyed by geopolitical tensions, notably Ukrainian strikes on Russian oil refineries that resulted in a significant fire at Rosneft’s largest refinery.
Additionally, unexpected declines in U.S. crude oil inventories last week, alongside a drop in gasoline inventories due to rising demand, have further supported oil prices.
The market is also closely watching developments related to central bank policies, with China’s decision to maintain its key policy rate aimed at currency stability, and signs of economic slowdown in the United States influencing sentiments regarding future Federal Reserve interest rate cuts, which could impact oil demand and economic growth.