Oil Prices Decline over Uncertain Demand Outlook
Crude oil prices slid in the global commodity market over uncertain demand outlook and diverge forecast by the Organization of the Petroleum Exporting Countries and International Energy Administration.
Trading data showed that crude oil prices slip as markets begin to weigh impact of higher U.S. interest rates which has persisted for longer than expected. The uncertainty around US Fed fund rates cut could be a drag on the economy and consequently be a limiting factor on oil demand.
Brent crude lost 0.6% to US$82.27 per barrel and West Texas Intermediate crude was down 0.7% to US$78.04/b at last look early Friday.
However, crude benchmarks are headed for their best week in more than two months due to solid projections for crude and fuel demand, Reuters said in a Friday report.
The Organization of the Petroleum Exporting Countries maintained its forecast for strong global oil demand growth in 2024, while Goldman Sachs expects solid U.S. fuel demand this summer, the report said.
“I wouldn’t be surprised to see oil prices head higher from here whilst the demand outlook continues to look rosier,” Reuters quoted Tim Waterer, chief market analyst at KCM Trade, as saying. “Much may depend on how the northern hemisphere summer demand picture plays out.”
The recent recovery in the benchmark Brent crude oil price is justified after energy agencies predicted a supply deficit on the oil market at least through the start of winter, Commerzbank said in a Friday note.
Brent crude has gained about US$7 in just over a week, recovering from losses after the Organization of the Petroleum Exporting Countries’ output cut decision, but a further price increase is not to be expected for the time being, the bank noted.
Based on forecasts by the International Energy Agency, the oil market will be undersupplied in the third quarter because the voluntary production cuts by the OPEC+ countries will still be fully in place.
The deficit could be even larger if certain countries reduce their overproduction. Meanwhile, OPEC expects the oil market to be undersupplied through the second half of 2024.
Crude oil processing figures for China are expected next week and are likely to weigh on sentiment, as they are already slightly below the year-ago level in the first four months, Commerzbank said. Adesina Says Great Opportunities Abound in Africa amid Global Challenges
