Oil Prices Dip on Surge in US Crude Production, Inflation

By Adedapo Adesanya

Oil prices dipped on Tuesday, following a higher-than-expected forecast for crude production and bearish economic data in the world’s largest oil producer, the United States.

Brent futures went down by 29 cents to sell at $81.92 a barrel and the US West Texas Intermediate (WTI) futures depreciated by 37 cents to quote at $77.56 per barrel.

US inflation rose again in February, keeping the Federal Reserve on course to wait at least until the summer before starting to lower interest rates.

The consumer price index, a broad measure of goods and services costs, increased 0.4 per cent for the month and 3.2 per cent from a year ago, the US statistics bureau reported on Tuesday.

This may yet worry as it expected that the US central bank will not move to lower rates until June.

Meanwhile, the US Energy Information Administration (EIA) raised its 2024 outlook for domestic oil output growth by 260,000 barrels per day to 13.19 million barrels.

The boosted forecast could be due to higher assumed oil prices.

Also, the American Petroleum Institute (API) said US crude stocks fell 5.521 million barrels in the week ended March 8.

Official US government data from the EIA is due on later Wednesday.

On the demand end, the Organisation of the Petroleum Exporting Countries (OPEC) stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, and further raised its economic growth forecast for this year saying there was more room for improvement.

In its monthly report, OPEC said that world oil demand will rise by 2.25 million barrels per day in 2024 and by 1.85 million barrels per day in 2025. Both forecasts were unchanged from last month.

OPEC’s expectation of oil demand growth is much more than the expansion of 1.22 million bpd so far forecast by the International Energy Agency (IEA). The IEA, which represents industrialised countries, is scheduled to update its forecasts on Thursday.

On the geopolitical front, ceasefire talks in Israel’s war against Hamas have faded, with negotiations making no progress in Egypt while Israel and Lebanon’s Hezbollah continue to exchange fire.

Although the Gaza conflict has not led to significant oil supply disruptions, Yemen’s Iran-aligned Houthis have been attacking ships in the Red Sea and Gulf of Aden since November in solidarity with Palestinians, hurting traders.