By Adedapo Adesanya
The oil market appreciated on Thursday to its highest level in nearly three months after US inflation data suggested interest rates in the world’s biggest economy were close to their peak.
Data on Wednesday showed US consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.
This caused the US Dollar index to drop to the lowest since April 2022, which helped to boost oil prices, with Brent crude growing by $1.25 or 1.6 per cent to $81.36 per barrel, and the US West Texas Intermediate crude expanding by $1.14 or 1.5 per cent to $76.89 per barrel.
Meanwhile, the markets expect just one more rate rise from the US Federal Reserve.
Higher rates can slow economic growth and reduce oil demand.
A report by the International Energy Agency (IEA) on Thursday predicted oil demand would hit a record high this year, though broader economic headwinds and interest rate hikes meant the increase would be slightly less than previously anticipated.
The agency continues to see a record-high global oil demand in 2023, at 102.1 million barrels per day, its closely-watched Oil Market Report showed on Thursday.
However, the pace of growth in demand was lowered by 220,000 barrels per day from last month’s projection, the first downward revision to oil demand growth for this year from the IEA.
Chinese demand growth continues to surprise to the upside, the IEA noted, but demand in developed economies, especially in Europe, has been languishing amid a slowdown in industrial activity.
China is expected to account for 70 per cent of the global oil demand growth this year, which is now expected at 2.2 million barrels per day, down from 2.4 million barrels per day expected a month ago.
A report from the Organisation of the Petroleum Exporting Countries (OPEC) also published on Thursday maintained an upbeat world oil demand outlook despite economic weakness.
The cartel said it expects world oil demand to rise by 2.25 million barrels per day in 2024, a rise of 2.2 per cent, compared with a growth of 2.44 million barrels per day in 2023.
Oil demand growth is an indication of likely oil market strength and forms part of the backdrop for policy decisions by OPEC and its allies, known as OPEC+. The group in June extended supply curbs into 2024 to support the market.
It also raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.
In China, however, momentum in the post-pandemic recovery slowed, with exports contracting last month at their fastest pace since the onset of the pandemic three years ago, the country’s Customs Bureau showed.
Dipo Olowookere