Oil prices surged to five-month highs on Thursday, buoyed by an improved demand outlook and supply concerns. The International Energy Agency (IEA) revised its crude demand growth forecast upward, alleviating concerns of a potential supply surplus.
At 14:30 ET (18:30 GMT), U.S. crude futures settled 1.9% higher at $81.26 a barrel, the highest level since November 6, while the Brent contract climbed 1.7% to $85.42 a barrel.
IEA Raises 2024 Demand Growth Forecast: The IEA upgraded its forecast for global oil demand in 2024, predicting a rise of 1.3 million barrels per day, an increase of 110,000 barrels per day from the previous month. The agency also anticipated a stronger-than-expected first-quarter global demand growth of 1.7 million barrels per day due to an improved U.S. outlook and increased bunkering demand for longer voyages.
US Inventory Draws Indicate Strengthening Demand: Oil prices received a boost after unexpected draws in U.S. oil and gasoline inventories signaled improving demand in the world’s largest fuel consumer. Crude inventories fell by approximately 1.5 million barrels in the week to March 8, contrary to expectations of a build of 0.9 million barrels. Additionally, gasoline stocks saw a substantial draw of 5.7 million barrels, exceeding expectations and marking the fifth consecutive week of significant draws.
Russian Refinery Attacks and Geopolitical Tensions: Tensions were further heightened by Ukrainian drone attacks on a major Russian fuel refinery, disrupting operations and limiting Russia’s fuel output. This incident, coupled with geopolitical risks stemming from increased clashes with Ukraine and the Israel-Hamas conflict, contributed to support for oil prices.
Market Outlook: Despite the bullish momentum, crude prices remained within a trading range of $75 to $85 a barrel established in recent months. Concerns over weak Chinese demand and the potential impact of higher interest rates on economic growth tempered further gains in oil prices.
Overall, the combination of optimistic demand forecasts, unexpected inventory draws, supply disruptions, and geopolitical tensions supported the recent surge in oil price.
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