The global oil intake will upward thrust through 1.1 million barrels in step with day in 2024, the IEA stated in a month-to-month report, up 130,000 bpd from its preceding forecast.
Oil prices rose sharply on Thursday, December 14, as the International Energy Agency (IEA) increased its oil demand forecast for next year and the US dollar fell to a four-month low. The IEA said that global oil consumption will grow by 1.1 million barrels per day (bpd) in 2024, up from its previous estimate of 0.97 million bpd, due to a better outlook for the US economy and lower oil prices.
Brent crude futures, the global benchmark, gained $2.49, or 3.4 percent, to settle at $76.75 a barrel. US West Texas Intermediate (WTI) crude futures, the US benchmark, rose $2.41, or 3.5 percent, to end at $71.88 a barrel, according to news agency Reuters. In India, on the Multi Commodity Exchange (MCX), crude oil futures for December 18 delivery, traded 3.87 percent higher at ₹6,005 per bbl, after touching a high of ₹6,020 and a low of ₹5,797 per bbl, compared to the previous close of ₹5,781 per barrel.
Also Read: India paid $84.2/bbl for Russian oil in October, highest since December 2022: Report
What lifted oil prices? -The IEA’s 2024 oil demand projection is much lower than the forecast of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), which expects the demand to grow by 2.4 million bpd next year. This suggests that the oil market will remain tight and support the prices.
-The US dollar, which measures the greenback against a basket of six major currencies, dropped to its lowest level since August 6, after the US Federal Reserve indicated that it will keep the interest rates unchanged until 2024, despite the rising inflation pressures.
-A weaker dollar makes oil cheaper for buyers using other currencies and also boosts the demand for commodities as a hedge against inflation. Lower interest rates also stimulate the economic activity and the oil consumption.
-The European Central Bank (ECB), on the other hand, resisted the market expectations of an early rate hike and said that it will keep the interest rates at record lows until the inflation outlook stabilizes.
-The US Energy Information Administration (EIA) reported that the US crude inventories fell by 4.3 million barrels in the week to December 8, more than the market forecast of a 3.8 million barrel drop, as the imports declined. This showed that the US oil demand remained strong despite the Omicron variant concerns.
What’s next for oil prices? Oil prices recovered from their earlier losses on Thursday, after a surprise drawdown in the US oil stocks and an attack on an oil tanker in the Red Sea.
The tanker, which was carrying crude oil from Saudi Arabia to Israel, was attacked by gunmen in a speedboat and missiles near Yemen’s coast, in the latest incident that threatened the security of the vital shipping route. The attack was claimed by the Yemeni Houthi rebels, who warned against traveling to Israel.
The US Federal Reserve’s decision to keep the interest rates on hold also supported the oil prices, as the dollar index plunged after the Fed meeting, making oil more attractive for foreign investors.
However, oil prices may face some volatility in the coming days, as the market weighs the impact of the Omicron variant on the global oil demand and the supply response from OPEC+ and other producers.
“We expect oil prices to remain volatile, and we see the support levels for crude oil at $69.05–68.40 and the resistance levels at $70.80-71.40. For the Indian Rupee (INR), we see the support levels for crude oil at ₹5,710-5,640 and the resistance levels at ₹5,860-5,940,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
