By Adedapo Adesanya
Brent crude rose by 4 per cent or $3.00 on Thursday to trade at $77.26 per barrel following a weaker Dollar and the lifting of oil demand forecast for next year by the International Energy Agency (IEA).
Also, the US West Texas Intermediate (WTI) crude climbed by $2.89 or 4.2 per cent to $72.36 per barrel, as the market turned around after hitting its lowest in nearly six months during Wednesday’s session.
The boost came as the IEA said world oil consumption will rise by 1.1 million barrels per day in 2024, which is up 130,000 barrels per day from its previous forecast, citing an improvement in the outlook for the US and lower oil prices.
The IEA, which advocates a speedy transition from fossil fuels, also cut its global demand growth forecast for the current quarter by almost 400,000 barrels per day to 1.93 million barrels per day due to a worsening economic outlook.
The 2024 estimate is less than half the forecast of the Organisation of the Petroleum Exporting Countries (OPEC) which sees demand growth of 2.25 million barrels per day.
In the report, the IEA also trimmed its forecast for oil demand growth in 2023 by 90,000 barrels per day to 2.3 million barrels per day with China accounting for 80 per cent of this year’s global rise.
The extension of OPEC+ supply cuts into the first quarter of next year had done little to boost prices, the IEA said, adding oil market sentiment turned decidedly bearish in November and early December.
In 2024, supply from producers outside OPEC+ is set to rise by 1.2 million barrels per day, a slowdown from this year’s 2.2 million barrels per day growth led by the US, the IEA forecast. This plus the slowdown in demand could be a headwind for OPEC+.
Crude prices also got a boost as the Dollar weakened after the US Federal Reserve on Wednesday signalled lower borrowing costs for 2024.
The Dollar fell to a four-month low on Thursday after the US central bank indicated interest rate hikes have likely ended and lower borrowing costs are coming in 2024.
Lower interest rates reduce consumer borrowing costs, which can boost economic growth and oil demand. A weaker Dollar makes oil less expensive for foreign purchasers.
On its part, the European Central Bank (ECB) pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.
Dipo Olowookere