Oil prices witnessed an increase on Thursday as the Organization of the Petroleum Exporting Countries (OPEC) predicted strong growth in global oil demand for the next two years. The market also focused on the impact of disrupted U.S. oil production due to extreme cold weather, along with geopolitical tensions in the Middle East.
During the early morning, Brent crude futures rose by 0.3 percent, or 21 cents, reaching $78.09 per barrel at 05:05 GMT. Similarly, U.S. West Texas Intermediate crude futures increased by 0.6 percent, or 40 cents, reaching $72.96, according to Reuters.
In its monthly report, OPEC stated that it expects world oil demand to rise by a robust 1.85 million barrels per day (bpd) in 2025, reaching 106.21 million bpd. For 2024, OPEC maintained its previous forecast of demand growth at 2.25 million bpd, as stated in December.
#Oil demand growth forecast remains unchanged at 2.2 mb/d for 2024, with the OECD growing by around 0.3 mb/d and the non-OECD by about 2.0 mb/d #MOMR pic.twitter.com/xtH19JGi2D
— OPEC (@OPECSecretariat) January 17, 2024
Market caution amidst price gains
Despite the price gains, the market was cautious due to a combination of factors. Yeap Jun Rong, market strategist at IG, highlighted that Brent crude prices have remained within a narrow range over the past two weeks as market participants grapple with mixed demand-supply dynamics and ongoing geopolitical tensions. The oil demand outlook was also affected by an unexpected increase in U.S. crude stockpiles and challenging recovery conditions in China.
Read more: Saudi Arabia: OPEC+ oil production cuts can continue past March if needed
Later today, the U.S. government is expected to release its data on oil stocks. Market sources, referring to figures from the U.S. Petroleum Institute on Wednesday, reported that domestic crude stocks increased by 480,000 barrels last week.
In addition, North Dakota, one of America’s major oil producers, reported a decline in oil production of 650,000 to 700,000 barrels per day due to temperatures dropping below zero. This represents less than half of the usual production levels.
Robust non-oil GDP growth in GCC countries
Meanwhile, Moody’s Investors Service stated on Wednesday that the sustained robust growth of real non-oil GDP in the Gulf Cooperation Council (GCC) countries, averaging around 4 percent, would help offset the decline in oil production resulting from the restrictions on crude production since November 2022.
According to their report, the recovery of oil production levels will be gradual, with the possibility of further production cuts from 2023 levels. This is in line with the announcement made by OPEC+ at the end of November, stating that voluntary production cuts would continue into the first quarter of 2024.
Moody’s also highlighted that significant government-led economic diversification projects in the Gulf region are progressing as planned, demonstrating the commitment to reduce long-term reliance on oil and gas.
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