Oil Climbs by 4% over Healthy Demand Outlook
Oil prices edged higher over five trading days in the just concluded week, helped by the release of healthy demand forecasts and supply concerns triggered by geopolitical tension between Israel and Palestine and the Russia-Ukraine war.
International benchmark Brent crude traded at $84.98 per barrel on Friday, increasing by around 3.53% relative to the closing price of $82.08 a barrel on Friday last week. West Texas Intermediate (WTI), the American benchmark, traded at $80.81 a barrel at the same time on Friday, for a rise of about 3.59% from last Friday’s session that closed at $78.01 per barrel.
Prices started the week on a negative note due to bearish Chinese data that signalled softer demand in the world’s largest crude importer and second-biggest oil consumer. Supply factors stemming from major producers reducing output and escalating geopolitical tensions over the Israel-Palestine conflict and the Russia-Ukraine war limited the fall in prices.
OPEC’s monthly oil market report, published on Tuesday, revealed that the global oil demand growth forecast for 2024 remains unchanged from last month’s assessment of 2.2 million barrels per day (bpd) year on year. Markets interpreted this forecast positively in support of upward price movements.
Despite data released Tuesday indicating US inflation exceeded expectations, the market anticipation that the US Federal Reserve (Fed) will begin rate cuts in June also boosted oil price rises. The US Energy Information Administration (EIA), in its latest report released on Tuesday, forecasted that world oil demand will reach 102.43 million bpd in 2024, while global oil production will be 102.17 million bpd.
In addition, the EIA revised up the price of Brent crude for 2024 and 2025, citing a decrease in global oil inventory in the near term due to the tight supply triggered by OPEC+ cuts.
Meanwhile, the American Petroleum Institute (API) late Tuesday announced a decrease of 5.5 million barrels in US crude oil inventories, against the market expectation of a draw of 400,000 barrels. It reinforced the perception that domestic demand remains strong enough to drive up oil prices.
According to EIA data released late Wednesday, US commercial crude oil inventories declined by around 1.5 million barrels and gasoline inventories by about 5.7 million barrels, last week. A drop in both crude and gasoline stocks signaled a rise in demand in the US in favor of higher prices.
Supply concerns triggered by the Israel-Palestine conflict and the Russia-Ukraine war led to more price increases. Israeli forces bombarded Gaza during the start of the Muslim holy month of Ramadan, despite international efforts to establish a ceasefire.
In Russia, Vasily Golubev, the governor of the Rostov region, stated on Telegram on Wednesday that an attack by a Ukrainian drone had shut down the largest oil refinery in the southern part of the country. The official said the drones fell on the territory of the Novoshakhtinks refinery, which has an annual oil processing capacity of 7.5 million tons.
The International Energy Agency’s (IEA) latest report on Thursday disclosed that global oil demand is projected to increase by 1.34 million bpd to 103.18 million bpd in 2024. The first quarter growth projections were revised up by 270,000 bpd, and also for the full year of 2024 by 110,000 bpd compared with last month’s report.
The IEA also predicts that global oil supply will increase by 800,000 bpd to 102.9 million bpd in 2024, including a downward adjustment to OPEC+ output. Despite the weekly gains, oil prices edged lower on Friday as data released on Thursday showed a larger-than-expected increase in producer prices last month in the US.
Some signs of slowing economic activity in the country caused uncertainty over the timing of the expected US Federal Reserve’s (Fed) interest rate cuts. In June, rate reductions by the Fed were anticipated. Lower interest rates are set to reduce the cost of consumer borrowing and stoke expectations of increased economic growth and demand for oil.
The strong US dollar following higher-than-expected consumer price inflation data and investor profit-taking also helped downward price trends. #Oil Climbs by 4% over Healthy Demand Outlook Foreign Investors Boost Interest in Nigeria US Dollar Bonds
