OIL prices rose more than 1 per cent on Wednesday after three key forecasters predicted that global oil inventories would fall in the second half of 2024, while US inflation data solidified expectations for a Federal Reserve interest rate cut by September.
Brent crude futures were up US$1.33, or about 1.6 per cent, to US$83.25 a barrel at 1338 GMT, with US West Texas Intermediate (WTI) crude futures also up by US$1.33, or roughly 1.7 per cent, to US$79.23.
Prices had eased more than 2 per cent last week after Opec and its allies said they would phase out output cuts starting from October.
The International Energy Agency (IEA), the US Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (Opec) have this week updated their views on the global oil demand-supply balance for 2024.
Their reports imply limited downside for prices in the second half of the year with all three predicting declines in global oil inventories, and the IEA seeing a larger depletion than the other two, said Tamas Varga of oil broker PVM.
Those views were echoed in industry data on Tuesday showing US crude oil inventories fell more than expected last week.
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US consumer price data, published on Wednesday, reinforced expectations of a Fed rate cut by September. The US central bank’s policy announcement is due later in the day with no change in rates expected just yet.
Higher borrowing costs tend to dampen economic growth, and could, by extension, limit oil demand.
Forecasters united but divided
Although the IEA trimmed its 2024 oil demand growth forecast on Wednesday to just under 1 million barrels per day (bpd), citing sluggish consumption in developed countries, the numbers suggest it agrees with Opec and the EIA that there will be stock draws in the second half of the year, PVM’s Varga said.
The IEA also predicted oil demand growth would plateau at 105.6 million bpd by 2029, and be well eclipsed by supply – a full 8 million bpd above projected demand – by 2030.
The IEA’s view for next year, and up to the 2030s, is bleak, noted Varga.
“But if there are stocks draws for the second half of this year, then why would we expect a significant fall on prices in the anticipation that there will be a glut by 2030?”
On Tuesday, the EIA raised its 2024 world oil demand growth forecast to 1.10 million bpd, while Opec stuck with its 2024 forecast of 2.25 million bpd. REUTERS
