Solid Projections for Crude and Fuel Demand Boost Oil Prices
Oil prices took a breather on Friday as the market digested the news of US interest rates staying higher for longer than expected. However, despite the slight dip, crude benchmarks were on track for their best week in over two months thanks to optimistic forecasts for crude and fuel demand, reported by Reuters.
Weekly Performance
Brent crude futures slipped 0.4 percent to $82.41 a barrel, while West Texas Intermediate US crude futures dropped 0.5 percent to $78.21 a barrel. Nonetheless, both Brent and the US benchmark saw gains of over 3 percent for the week, marking their strongest performance since April 5.
Positive Outlook
The Organization of Petroleum Exporting Countries (OPEC) maintained its prediction for robust global oil demand growth through 2024, and Goldman Sachs anticipated strong US fuel demand for the summer. These optimistic projections helped reverse losses from the previous week, fueled by the decision by OPEC+ to gradually increase output cuts starting in September.
Market Analysis
Tim Waterer, chief market analyst at KCM Trade in Australia, described the week as a “recovery effort for oil” and expressed confidence in a potential price increase as demand outlook improves. He emphasized the importance of monitoring the summer demand trends in the northern hemisphere.
Supportive Factors
Russia affirmed its commitment to meeting output obligations under the OPEC+ agreement, despite exceeding its quota in May. However, the momentum of the price rally slowed after the US Federal Reserve opted to maintain interest rates and postponed the possibility of rate cuts until later in the year.
Market Concerns
While the International Energy Agency projected a peak in oil demand by 2029, reaching around 106 million barrels per day by the end of the decade, worries about the economic outlook lingered following the Fed’s decision on interest rates. Market watchers are also keeping an eye on the Gaza ceasefire talks, hoping for a resolution to ease concerns about potential oil supply disruptions from the region.
Geopolitical Tensions
Amidst the uncertainty, the US expressed apprehension about escalating hostilities on the Israel-Lebanon border, emphasizing the need for specific security arrangements in the area. A senior US official stressed that a ceasefire in Gaza alone would not suffice to prevent a full-blown war.