Oil Price Set for a Slight Weekly Gain on IEA Demand Forecast and U.S. Stockpile Decline
Oil Prices Edge Lower After Weekly Gain
Oil prices experienced a slight decline on Friday after posting a weekly gain of over 3%.
The uptick was attributed to the International Energy Agency's (IEA) upward revision of its 2024 oil demand forecasts and an unexpected drop in U.S. stockpiles.
However, Brent crude futures dipped by 0.6% to $84.83 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by 0.6% to $80.70.
Consolidation Phase Amidst Market Uncertainty
Following a surge to four-month highs, crude futures are now undergoing a mild retreat, likely entering a consolidation phase to await further direction.
Throughout the past month, prices had been range-bound between $80 to $84 a barrel.
The IEA's latest report, which raised its 2024 oil demand outlook, contributed to this week's gains, amid ongoing disruptions in Red Sea shipping due to Houthi attacks.
Demand-Supply Dynamics and Geopolitical Tensions
The IEA forecasts a rise in global oil demand by 1.3 million barrels per day (bpd) in 2024, reflecting a slight supply deficit for the current year if OPEC+ members maintain output cuts.
Geopolitical tensions, such as Ukrainian strikes on Russian oil refineries, also weighed on the market sentiment, resulting in a fire at Rosneft's major refinery.
Additionally, unexpected declines in U.S. crude oil stockpiles, coupled with increased demand for gasoline, further supported prices.
Impact of Economic Indicators and Central Bank Policies
The strengthening of the U.S. dollar, despite its fastest pace in eight weeks, did not significantly dampen oil prices.
However, concerns about the timing of expected interest rate cuts by the U.S. Federal Reserve lingered, particularly as economic indicators suggested some signs of slowing activity in the United States.
Notably, China's decision to maintain its key policy rate underscored the importance of currency stability amidst global economic uncertainties.
Outlook and Potential Market Developments
As market participants monitor geopolitical developments and economic indicators, including the timing of interest rate adjustments by central banks, oil prices may continue to experience volatility.
Factors such as supply disruptions, demand fluctuations, and policy decisions will likely influence market sentiment and direction in the coming weeks.
