Oil prices saw an increase on Friday, poised to achieve their first weekly gain in two months. This boost was fueled by a positive outlook from the International Energy Agency (IEA) regarding oil demand in the coming year and a weaker U.S. dollar.
Brent futures advanced by 21 cents, reaching $76.82 per barrel at 0640 GMT, while U.S. West Texas Intermediate (WTI) crude climbed 20 cents to $71.78. Both benchmarks are on track for a modest weekly gain, driven in part by the U.S. Federal Reserve's mid-week announcement indicating a likely cut in borrowing costs for the following year.
"Oil prices may experience a 'demand pull' as liquidity conditions improve following the Fed's dovish pivot," noted Kelvin Wong, an analyst at OANDA in Singapore.
The U.S. dollar dropped to a four-month low on Thursday after the U.S. central bank signaled that interest rate hikes have probably concluded and lower borrowing costs are anticipated in 2024.
A weakened dollar has the effect of making dollar-denominated oil more affordable for foreign buyers.
On Thursday, the European Central Bank (ECB) countered expectations of imminent interest rate cuts by reiterating its commitment to keeping borrowing costs at record levels, even amid lower inflation expectations.
According to the International Energy Agency (IEA) monthly report, global oil consumption is projected to increase by 1.1 million barrels per day (bpd) in 2024. This figure is up by 130,000 bpd from the IEA's previous forecast, with improvements in the outlook for U.S. demand and lower oil prices cited as contributing factors.
The 2024 oil consumption estimate of 1.1 million barrels per day (bpd) is less than half of the demand growth forecast of 2.25 million bpd by the Organization of the Petroleum Exporting Countries (OPEC).
Weak economic data from China, the world's second-largest oil consumer, has exerted additional pressure on oil prices in recent weeks. Data released by China's statistics bureau on Friday revealed that refinery runs in November reached their lowest level since the start of 2023. Margin pressure on non-state-owned refiners led to production cutbacks, while sluggish diesel consumption impacted national fuel demand.
Despite ongoing challenges in China's property market, the data indicated a better-than-expected performance in industrial output and improving retail sales. This provided some relief to market sentiment amid the country's slow post-COVID economic recovery.
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