Oil prices are down slightly on Friday but are set to gain almost 4% for the week, thanks to the International Energy Agency’s revised forecast for 2024 oil demand and an unexpected decrease in US stockpiles. Brent crude oil futures fell by 25 cents or 0.3% to $85.17 a barrel at 0533 GMT, after reaching $85 a barrel for the first time since November on Thursday.
Meanwhile, US West Texas Intermediate (WTI) crude fell by 22 cents or 0.3% to $81.04. The IEA has raised its forecast on 2024 oil demand for the fourth time since November due to Houthi attacks disrupting Red Sea shipping. The IEA’s latest report predicts world oil demand will rise by 1.3 million bpd in 2024, up 110,000 bpd from the previous month. It also foresees a slight supply deficit this year after OPEC+ members extended cuts, from a surplus previously. ANZ analysts have noted that US oil refinery utilisation is expected to pick up, saying “refineries are coming online after shutting capacity in January due to winter freeze.” ANZ analysts also commented that European refinery margins are improving, and there are signs of a “tightening market balance.” Despite the US dollar strengthening, oil prices have risen this week.
The dollar’s strength makes crude oil more expensive for non-dollar users. Ukrainian strikes on Russian oil refineries have also supported oil prices this week, causing a fire at Rosneft’s largest refinery in one of the most significant attacks against Russia’s energy sector in recent months. The Energy Information Administration reported that US crude oil stockpiles unexpectedly fell last week as refineries ramped up processing while gasoline inventories slumped as demand rose. On the demand side, China’s central bank has left a key policy rate unchanged as authorities continue to focus on currency stability amid uncertainty over the timing of expected Federal Reserve interest rate cuts. Lower interest rates reduce consumer borrowing costs, boosting economic growth and oil demand. Some signs of slowing economic activity in the United States are unlikely to prompt the Federal Reserve to start cutting interest rates before June as other data on Thursday showed a larger-than-expected increase in producer prices last month.
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