Crude Oil Market Falls Despite Positive Signals

March 17, 2024
brent crude oil

By Adedapo Adesanya 

The crude oil market depreciated on Friday despite reporting gains earlier in the week due to improved demand and expected supply tightness.

Brent futures slid by 9 cents or 0.11 per cent to $85.33 a barrel, and the US West Texas Intermediate (WTI) futures declined by 17 cents or 0.21 per cent to $81.09 per barrel.

Market analysts noted that supplies are tightening for motor fuels, and prices are at risk of going higher, but there are worries the US Federal Reserve won’t be able to cut interest rates because inflation remains above the central bank’s target of 2 per cent.

Cuts in interest rates are seen as opportunities for demand growth in the United States.

Some signs of slowing economic activity could deter the Federal Reserve from starting to cut interest rates before June, as other data from the world’s largest oil economy showed an increase in producer prices last month.

The International Energy Agency (IEA) on Thursday raised its view on 2024 oil demand for the fourth time since November as Houthi attacks have disrupted Red Sea shipping.

The agency expects that world oil demand will rise by 1.3 million barrels per day in 2024, according to its latest report, up 110,000 barrels per day from last month. It forecast a slight supply deficit this year should members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) sustain their output cuts, having previously forecast a surplus.

Geopolitical events, especially the Ukraine-Russia conflict, are intensifying concerns about oil supply. Recent Ukrainian drone strikes on Russian refineries have raised supply risks. These events, alongside supply cuts by OPEC+, could provide support for oil prices.

Lower refining capacity in the second quarter, due to refinery maintenance and emergency repairs following the attacks, could be one of the reasons why Russia said it would focus on cuts to oil production instead of exports in its voluntary supply reduction as part of OPEC+ in the second quarter.

US crude oil stockpiles also fell unexpectedly last week as refineries ramped up processing while gasoline inventories slumped as demand rose, the Energy Information Administration (EIA) said on Wednesday.

Also, US energy firms this week added the biggest number of oil and natural gas rigs in a week since September, with the oil rig count also rising to its highest in six months, energy services firm Baker Hughes said in a report.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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