Oil prices poised to finish the week approximately 4% higher
Oil prices slipped slightly on Friday but remained on course to register a nearly 4% gain for the week. This was supported by the International Energy Agency’s upward revision of its 2024 oil demand forecasts and an unexpected decrease in U.S. stockpiles.
Brent crude oil futures dropped by 38 cents, or 0.4%, to $85.04 a barrel at 0751 GMT, following their surpassing of $85 a barrel for the first time since November on Thursday. U.S. West Texas Intermediate (WTI) crude fell by 35 cents, or 0.4%, to $80.91.
The IEA raised its outlook on 2024 oil demand for the fourth time since November, attributing the increase to disruptions in Red Sea shipping caused by Houthi attacks.
The IEA stated in its latest report that world oil demand is projected to increase by 1.3 million barrels per day in 2024, up by 110,000 barrels per day from last month’s estimate. It also forecasted a slight supply deficit for this year following the extension of cuts by OPEC+ members, compared to a surplus previously anticipated.
ANZ analysts pointed out that U.S. oil refinery utilization is anticipated to increase. In a report on Friday, they stated, “refineries are coming online after shutting capacity in January due to winter freeze.”
“European refinery margins are picking up as well,” they remarked, further noting signs of a “tightening market balance”.
Despite the U.S. dollar strengthening at its most rapid pace in eight weeks, gains this week persisted. A stronger dollar renders crude oil more costly for users of other currencies.
Oil prices were further bolstered this week by Ukrainian strikes on Russian oil refineries. These strikes led to a fire at Rosneft’s largest refinery, marking one of the most significant attacks against Russia’s energy sector in recent months.
U.S. crude oil inventories also unexpectedly declined last week as refineries increased processing, while gasoline inventories plummeted due to rising demand, as reported by the Energy Information Administration on Wednesday.
On the demand side, China’s central bank opted to keep a key policy rate unchanged. This decision reflects authorities‘ focus on maintaining currency stability amid uncertainty regarding the timing of anticipated Federal Reserve interest rate cuts.
Lower interest rates reduce consumer borrowing expenses, potentially stimulating economic growth and increasing demand for oil.
In the United States, while there were some indications of slowing economic activity, it was deemed unlikely to prompt the Federal Reserve to initiate interest rate cuts before June. Other data released on Thursday revealed a larger-than-expected rise in producer prices last month.
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