Oil ticks higher after IEA, OPEC demand forecasts; Brent at $78/bbl
The IEA monthly report said it expects oil demand to grow by 1.24 million barrels per day (bpd) in 2024, up 180,000 bpd from its previous projection. Oil traders also worried about geopolitical risks in the Middle East. Pakistan conducted strikes inside Iran, targeting Baluchi separatist militants, the country’s foreign ministry said, two days after Iranian strikes inside Pakistani territory.
Brent crude futures gained 66 cents, or 0.9 per cent, to $78.54 a barrel. US West Texas Intermediate crude futures rose 98 cents, or 1.4 per cent, to $73.54, according to news agency Reuters. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a January 19 expiry, was last trading 2.96 per cent higher at ₹6,149 per bbl, having swung between ₹6,000 and ₹6,157 per bbl during the session, against a previous close of ₹5,972 per barrel.
What’s driving crude oil prices?
-The US Energy Information Administration reported a larger than expected draw in crude inventories of 2.5 million barrels in the week ended January 12. Last week the US produced another record of 13.3 million barrels per day of crude oil.
-On Wednesday, OPEC said it expected demand growth of 2.25 million bpd this year, unchanged from its forecast in December. The producer group also said oil demand is expected to rise by a robust 1.85 million bpd in 2025 to 106.21 million bpd.
-The IEA’s executive director, Fatih Birol, told the Reuters Global Markets Forum he expects oil markets to be “comfortable and balanced” this year despite Middle East tensions, rising supply and slowing demand growth.
-In the US, about 40 per cent of oil output in North Dakota’s oil output remained shut-in due to extreme cold weather and operational challenges, the top oil-producing state’s pipeline authority said on Wednesday.
Oil’s range-bound trading in recent days reinforces the narrative that investors are shrugging off concern that tankers may be at risk from attacks in the Red Sea, said Ehsan Khoman, analyst at bank MUFG.
-Oil tankers that had diverted away from the Red Sea have turned back and passed through the Bab al-Mandab Strait, ship-tracking data shows, though tensions in the region continued to disrupt global shipping and trade.
-Attacks by Yemen-based Houthi militants against ships in the Red Sea have forced many companies to divert cargoes around Africa, adding to journey times and costs. The US conducted another round of strikes against Houthi targets in Yemen in retaliation for the attacks on shipping.
Where are prices headed?
Crude oil exhibited significant volatility on Wednesday rebounding from its lows following better-than-expected US retail sales and core retail sales data. Also, tensions in the Middle East escalated after Iran fired a missile over Pakistan, contributing to the recovery in crude oil prices. OPEC’s optimistic global demand forecast for the next two years further bolstered prices at lower levels, according to analysts.
‘’Despite these factors, the strength of the dollar index and disappointing Chinese fourth-quarter GDP data imposed constraints on gains. Anticipating ongoing volatility, we expect crude oil prices to fluctuate. The support levels are at $71.90–71.10, with resistance observed at $73.15-73.80. In INR, crude oil finds support at ₹5,905-5,830 and faces resistance at ₹6,070-6,150,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Published: 18 Jan 2024, 10:53 PM IST
