Oil Prices Climb as Dollar Weakens and IEA Upgrades Demand Outlook
Oil prices experienced an increase on Thursday, building on the gains from the previous session. This upward momentum was attributed to a weaker dollar and a boost from the International Energy Agency (IEA), which raised its oil demand forecast for the next year.
Brent futures rose by $1.42, or 1.9%, reaching $75.68 a barrel at 1131 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude climbed $1.34, or 1.9%, reaching $70.81.
The IEA‘s monthly report indicated that world oil consumption is expected to increase by 1.1 million barrels per day (bpd) in 2024. This represents an upward revision of 130,000 bpd from its previous forecast, citing an improved outlook for the United States and lower oil prices.
The IEA’s estimate for 2024 oil consumption, an increase of 1.1 million barrels per day, is less than half of the forecast made by the Organization of the Petroleum Exporting Countries (OPEC).
In addition to the upward revision in oil demand projections, the boost in oil prices was further supported by a weaker dollar. The U.S. central bank’s signal of lower borrowing costs for 2024 contributed to the dollar dropping to a fresh four-month low on Thursday. The Federal Reserve’s latest economic projections indicated the conclusion of the interest rate hike cycle, paving the way for lower borrowing costs in 2024.
“Crude oil prices rebounded before the Fed meeting, and the event lifted them further,” said CMC Markets analyst Tina Teng in a client note.
Lower interest rates have the potential to reduce consumer borrowing costs, contributing to increased economic growth and demand for oil. Additionally, a weaker dollar makes oil more affordable for foreign buyers.
The positive momentum in oil prices was further fueled by a larger-than-expected draw from U.S. crude inventories, providing additional support to the mark.
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The U.S. Energy Information Administration (EIA) reported that energy firms recorded a larger-than-expected withdrawal of 4.3 million barrels of crude from stockpiles in the week ending December 8, primarily due to a decline in imports.
Brent futures have experienced a decline of approximately 10% since the announcement of OPEC+’s plans for a new round of production cuts on November 30. OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and allied nations, such as Russia.
