Oil prices experienced an increase on Friday, signaling their first weekly rise in two months. This boost was attributed to a positive oil demand forecast for the upcoming year by the International Energy Agency (IEA) and a weaker U.S. dollar. Brent futures saw a rise of 21 cents, reaching $76.82 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed 20 cents, reaching $71.78.
Both Brent and WTI benchmarks are expected to achieve a modest weekly gain, primarily due to an announcement made by the U.S. Federal Reserve mid-week, indicating a probable reduction in borrowing costs in the next year.
Read more: Oil prices remain resilient following a six-month low
Kelvin Wong, an analyst at OANDA in Singapore, mentioned that improved liquidity conditions following the Federal Reserve’s shift towards a more accommodative stance may contribute to a “demand pull” for oil prices.
The U.S. dollar experienced a four-month low on Thursday, prompted by the U.S. central bank’s suggestion that interest rate hikes have likely concluded and lower borrowing costs are expected in 2024. A weaker dollar makes oil, priced in dollars, more affordable for foreign buyers.
Contrarily, the European Central Bank (ECB) contradicted expectations of immediate interest rate cuts by reasserting that borrowing costs would remain at record highs, despite lower inflation projections.
IEA projects global oil consumption to rise in 2024
According to the IEA’s monthly report, global oil consumption is projected to increase by 1.1 million barrels per day (bpd) in 2024. This figure reflects an upward revision of 130,000 bpd from the previous forecast, attributed to an improved outlook for U.S. demand and lower oil prices.
However, the IEA’s demand growth estimate for 2024 falls significantly short of the Organization of the Petroleum Exporting Countries’ (OPEC) forecast, which predicts a growth of 2.25 million bpd.
China’s economic data weighs on oil prices
Recent weak economic data from China, the world’s second-largest oil consumer, has exerted downward pressure on oil prices. The country’s statistics bureau released data showing that refinery runs in November reached their lowest level since the start of 2023. This decline was a result of margin pressure on non-state owned refiners, leading them to reduce production. Additionally, sluggish diesel consumption negatively impacted national fuel demand.
Despite ongoing challenges in China’s property market, the data also revealed a better-than-expected performance in industrial output and improving retail sales. This provided some relief to market sentiment amid the country’s slow post-COVID economic recovery.
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