The oil surge over 3% on Thursday, propelled by a weakening dollar and a modestly improved global demand outlook for 2024. Building on the momentum from the previous session, West Texas Intermediate for January climbed $2.50 (3.60%) to reach $71.96 per barrel, while the Brent contract for February rose $2.58 (3.47%) to hit $76.84 a barrel.
Wednesday’s 1% increase in oil prices was attributed to a substantial 4.3 million barrel drawdown in U.S. crude inventories, surpassing expectations.
Oil Prices Surge 3% impacts IEA 2024 Global Oil Demand
The International Energy Agency (IEA) adjusted its forecast, anticipating a 1.1 million barrel per day growth in global oil demand for 2024, a slight increase from the earlier projection of 930,000 barrels per day. In the context of these developments, Oil Prices Surge 3%, responding to a slightly improved outlook. Allaying concerns further, the Federal Reserve on Wednesday signaled progress in curbing inflation, paving the way for three anticipated rate cuts in 2024. This potential monetary policy shift could positively impact oil demand next year, countering the usual economic growth impediments associated with higher interest rates that typically weigh on crude prices.
Further contributing to the rise, the U.S. dollar fell to a four-month low after the Fed signaled the end of rate hikes. A weaker dollar makes oil more affordable, potentially boosting demand.
These recent gains offer a brief respite from a significant decline in oil prices, which saw a drop of over $20 from September highs through Wednesday’s close. The decline was driven by record U.S. production and concerns about oversupply amid a weakening Chinese economy.
OPEC Supply Cut Doubts Amid IEA Warning on 2024 Oil Demand
Despite OPEC’s commitment, along with key allies such as Russia, to cut supply by 2.2 million barrels per day in Q1 2024, doubts persist among traders about the effectiveness of these voluntary reductions. OPEC, in its December market report, attributed the sharp decline in oil prices to “exaggerated concerns about oil demand growth.”
However, the IEA, the Western energy watchdog, anticipates a slowdown in demand growth by half in 2024. Concurrently, countries like the U.S., Brazil, and Guyana are generating “record-breaking supply.” While production growth outside OPEC is expected to decelerate next year, it is projected to still outpace demand at 1.2 million barrels per day.
In light of these dynamics, the IEA suggests that the ongoing increase in output and decelerating demand growth will complicate efforts by key producers, potentially impacting their ability to defend market share and maintain elevated oil prices. Learn mor about energy.
Heating Oil News Writer, John Hendrick
