Oil prices saw a marginal increase on Wednesday, driven by positive forecasts for global demand from both the U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC).
Brent crude futures edged up by 11 cents to reach $82.04 per barrel, while U.S. West Texas Intermediate (WTI) crude futures rose by 18 cents to settle at $78.10 per barrel.
The upward momentum in oil prices was fueled by the EIA’s revision of its projection for global oil demand growth in 2024, raising it to 1.10 million barrels per day, up from the previous estimate of 900,000 barrels per day. Similarly, OPEC maintained its forecast for robust growth in global oil demand for 2024, citing expectations of increased travel and tourism activity in the latter half of the year.
However, last week’s announcement by OPEC and its allies to gradually phase out production cuts starting in October had initially led to a slight decline in oil prices, with markets exhibiting cautious sentiment in response to the decision. Nonetheless, analysts at ANZ suggested that the market appeared poised to accept this decision, particularly in light of anticipated demand surges from China and other emerging economies.
The decline of 2.428 million barrels in U.S. crude oil stocks for the week ending June 7, reported by market sources citing figures from the American Petroleum Institute, exceeded expectations. A preliminary Reuters poll had forecasted a decrease of just over one million barrels, indicating a stronger-than-anticipated drawdown in inventories.
Investor focus also shifted to the impending release of the Consumer Price Index report and the U.S. Federal Reserve’s policy announcement later in the day. Friday’s release of a stronger-than-expected U.S. monthly jobs report tempered expectations for an immediate rate cut by the Federal Reserve. As a result, markets adjusted their outlook, pricing in approximately a 50% chance of a rate cut in September, according to the CME’s FedWatch tool.
Additionally, the release of Chinese producer and consumer price inflation data during the day added to market sentiment and influenced oil price dynamics, reflecting the interconnectedness of global economic indicators and their impact on commodity markets.
In summary, the modest gains in oil prices on Wednesday underscored the delicate balance between demand forecasts, supply dynamics, and macroeconomic indicators, highlighting the ongoing sensitivity of oil markets to global economic trends and geopolitical developments.