By Adedapo Adesanya
The oil market finished lower on Friday as traders tried to reconcile mixed signals for demand in the coming year, with Brent futures shedding 6 cents or 0.08 per cent to trade at $76.55 a barrel and the US West Texas Intermediate (WTI) futures lost 15 cents or 0.21 per cent to sell at $71.43 per barrel.
The market tumbled earlier in the session after a New York Federal Reserve Bank manufacturing survey showed a third month of declines in new orders, which could be a sign of weaker demand for oil in the coming year.
Mixed signals about interest rates in the world’s largest oil producer, the US, also raised worries.
For instance, there were comments from New York Federal Reserve Bank President, Mr John Williams, on Friday about hopes for interest rate cuts in the coming year, noting that “it’s just premature to be even thinking about” questions of lowering rates.
On his part on Thursday, the Federal Reserve Chairman, Mr Jerome Powell, said interest rate hikes intended to curb inflation were likely at an end but left open the possibility for further increases.
As a result of this, the US Dollar fell to a four-month low and the index was broadly steady on Friday. A weaker Dollar makes oil cheaper for foreign buyers.
There is also confusion regarding the different forecasts on the market from the International Energy Agency (IEA), the Organization of the Petroleum Exporting Countries (OPEC), and the U.S. Energy Information Administration (EIA)
The IEA updated its oil demand forecast for 2024, projecting an increase in global consumption by 1.1 million barrels per day. This adjustment, which cites an improved outlook for the US economy and the influence of lower oil prices, marks a significant shift from the IEA’s previous stance.
In contrast, OPEC maintains a more bullish forecast, anticipating a much larger increase in demand.
Meanwhile, the EIA has moderated its price forecast for Brent crude in 2024 to $83 per barrel, reflecting a nuanced perspective on global supply and demand dynamics.
This divergence in forecasts by major agencies underscores the ongoing debates and uncertainties in predicting future oil market trends.
Meanwhile, another bullish signal for oil markets on Friday was the lower drilling rig count from energy technology firm Baker Hughes. The oil and gas rig count, an early indicator of future output, fell by 3 to 623 in the week to December 15.
Modupe Gbadeyanka