By Adedapo Adesanya
The oil market rose by about 1 per cent on Friday on geopolitical tensions in the Middle East despite a bearish world demand growth forecast from the International Energy Agency (IEA) and worries about slower US interest rate cuts.
Yesterday, the price of the Brent crude futures went up by 71 cents to $90.45 a barrel, and the US West Texas Intermediate (WTI) crude futures increased by 64 cents to $85.66 per barrel.
On a week-on-week basis, Brent declined by 0.8 per cent, while WTI fell more than 1 per cent.
Oil prices during the week neared a six-month high on concerns that Iran, the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), might retaliate for a suspected Israeli warplane attack on Iran’s embassy in Damascus on Monday.
This was not eased as the US said it expects an attack by Iran against Israel, which it said would not be big enough to lure America into war, according to a US official.
Reuters reported that Iranian sources said the country has signalled a response aimed at avoiding a major escalation.
For market analysts, supply chain issues still carry the biggest risk premium as Iran maintains its threat to shut the Suez Canal.
The IEA trimmed its forecast for 2024 oil demand growth on Friday, citing lower-than-expected consumption in OECD countries and a slump in factory activity.
The Paris-based energy watchdog lowered its growth outlook for this year by 130,000 barrels per day to 1.2 million barrels per day, adding that the release of pent-up demand by top oil importer China after easing COVID-19 curbs had run its course.
On its part, OPEC said world oil demand will rise by 2.25 million barrels per day in 2024.
Demand growth in 2025 will edge down to 1.1 million barrels per day, the IEA added, with global GDP growth forecast to remain steady and electric vehicle expansion expected to gather pace, it said.
After emerging later than other countries from COVID-19 movement restrictions, China is expected to account for less of the world’s demand growth.
The IEA noted that China’s contribution to the global increase in oil demand is set to weaken from 79 per cent in 2023 to 45 per cent in 2024 and 27 per cent next year.
US inflation has dampened hopes for an interest rate cut as early as June. Higher interest rates can weaken economic growth and depress oil demand.
Meanwhile, energy firms in the US this week cut the number of oil rigs operating for a fourth week in a row, according to the energy services firm Baker Hughes in its closely followed report. The oil and gas rig count, an early indicator of future output, fell by three to 617 in the week to April 12, the lowest since November.
Dipo Olowookere