Dec 14, 2023: Oil prices experienced a significant rise on Thursday, propelled by improved market sentiment following the Federal Reserve’s dovish stance and the International Energy Agency’s (IEA) optimistic upward revision of next year’s oil demand forecast.
As of 08:50 ET (13:50 GMT), U.S. crude futures surged 2.7% to $71.31 per barrel, while the Brent contract climbed 2.6% to reach $76.16 per barrel.
IEA Raises Global Oil Demand Projection for 2024
The oil market received a substantial boost as the IEA revised its global oil consumption forecast in its monthly report, projecting a rise of 1.1 million barrels per day—up 130,000 barrels per day from its earlier estimation. The report attributed this increase to an improved outlook for the United States and a decrease in oil prices.
The monthly report by OPEC echoed positivity, estimating a tighter crude oil market for the fourth quarter of 2023 and for 2024. This projection was based on the assumption that announced output cuts would be upheld, resulting in supply falling short of market demand.
Weaker Dollar Aids Market Support
Following the U.S. Federal Reserve’s decision to maintain unchanged interest rates in its final policy meeting of the year and signal future rate cuts in 2024, the market rallied. Lower interest rates tend to reduce consumer borrowing costs, potentially stimulating economic growth and fostering oil demand. This is particularly noteworthy for the U.S., the world’s largest consumer of crude oil.
The Energy Information Administration’s data from Wednesday showcased a substantial decrease of 4.3 million barrels in U.S. oil inventories for the week ending December 8, significantly surpassing the expected 650,000 barrels decline.
Furthermore, the dollar witnessed significant weakening due to the Fed’s more accommodative stance, reaching a fresh four-month low earlier on Thursday. A weaker dollar makes oil, priced in U.S. currency, more affordable for foreign buyers.
Focus on Middle East Supply Concerns
Amid the market surge, concerns persist regarding potential disruptions in Middle East oil supply following an attack on a tanker in the Red Sea. These geopolitical uncertainties continue to factor into crude prices.