Oil prices hit 5-month high after IEA revises demand projection over tighter market; Brent at $85/bbl
Oil prices climbed to a five-month high mark on Thursday, March 14 as the International Energy Agency (IEA) raised its view on oil demand growth this year, predicting a tighter market in 2024. The Paris-based energy watchdog today raised its view on the oil demand growth in 2024 for a fourth time since November 2023.
Brent crude oil futures rose $1.21, or 1.4 per cent, to $85.26 per barrel, after touching an intra-day high of $85.53, its highest since early November. US West Texas Intermediate (WTI) crude was up $1.41, or 1.8 per cent, at $81.13. Benchmark Brent had settled above $84 a barrel for the first time since November on Wednesday, with both benchmarks clocking gains close to three per cent, according to news agency Reuters.
What’s pushing crude oil prices?
-While raising the demand forecast, the IEA warned that the global economic slowdown acts as an additional headwind to oil use. The energy watchdog projects that the demand will rise by 1.3 million barrels per day i(bpd) n 2024, up 110,000 bpd from last month, but lower than growth of 2.3 million bpd last year.
-The IEA also cut its 2024 supply forecast and now expects oil supply to rise by 800,000 bpd to 102.9 million bpd this year. On the other hand, IEA’s views differs from the projections by Organisation of Petroleum Exporting Countries (OPEC) which retained its forecast for 2024 demand.
-The IEA and OPEC are the world’s most closely watched forecasters of oil demand growth and have emerged most divided on the 2024 oil demand forecast than they have been since at least 2008.
-Russia’s energy ministry said that it expects a rise in crude exports because of the refinery outages. The Ukrainian drone strikes on Russian refining facilities continued for a second day on Wednesday, targeting four large oil refineries.
-Russia’s seaborne fuel exports fell 1.5 per cent from the previous month in February because of refinery downtime stemming from Ukrainian drone attacks and fires. The damage to refineries could cut Russian gasoline production by more than 10 per cent, according to analysts.
-In the US, crude and gasoline inventories declined last week, government data showed on Wednesday, with sharply higher pump prices expected in the coming weeks as major refinery outages have cut supplies ahead of the summer driving season.
-According to Reuters, traders see a 63.5 per cent chance of the US Federal Reserve cutting rates in June, according to the CME FedWatch tool. Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.
Also Read: OPEC, IEA emerge most divided on oil demand projections since 2008
Where are prices headed?
Crude oil experienced significant price volatility followed by a rebound. Prices surged in international markets, reaching four-month highs on Wednesday, attributed to a decline in US oil stocks and potential disruptions in Russian supply due to Ukrainian attacks on its refineries, said analysts.
‘’Ukrainian drone strikes on Russian refineries could further impact the export of Russian oil to global markets, thereby supporting prices. Expectations are for continued volatility. Crude oil finds support at $78.50–77.90, with resistance at $79.90-80.70. In INR, support lies at ₹6,520-6,450, while resistance is seen at ₹6,670-6,740,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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