By Colleen Howe and Jeslyn Lerh
SINGAPORE (Reuters) – Oil prices saw a slight increase on Wednesday as signs of near-term supply tightness emerged, despite remaining near a two-week low. This comes after OPEC revised its forecast for global oil demand growth in 2024 and 2025 downwards.
Crude oil futures rose 17 cents, or 0.24%, to $72.06 a barrel by 0420 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 14 cents, or 0.21%, reaching $68.26.
“Oil prices edged higher as tightness in the physical market offset bearish sentiment on demand. Buyers in the physical market have been particularly active, with any available cargoes being snapped up quickly,” ANZ analysts said in a note.
However, falling demand projections and weakness in major consumer China continued to weigh on market sentiment.
“We may expect prices to consolidate around current levels for longer,” said Yeap Jun Rong, market strategist at IG, adding that the recent attempt for a bounce was quickly sold into.
In its monthly report on Tuesday, the Organization of Petroleum Exporting Countries (OPEC) stated that world oil demand would rise by 1.82 million barrels per day (bpd) in 2024, down from the 1.93 million bpd forecast last month, primarily due to weakness in China, the world’s largest oil importer.
Oil prices settled up 0.1% on Tuesday following the news, after experiencing around a 5% decline during the two previous sessions.
OPEC also decreased its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd.
The International Energy Agency is set to publish its updated forecast on Thursday.
Barclays analysts wrote, “The re-election of former President Trump is unlikely to materially affect oil market fundamentals over the near term, in our view.
However, markets could still feel the effects of a supply disruption from Iran or a further escalation between Iran and Israel, according to Barclays.
Two U.S. central bankers mentioned on Tuesday that interest rates are acting as a brake on inflation that is still above the 2% mark, hinting that the Federal Reserve may be open to further interest rate cuts.
The Fed recently cut its policy rate by a quarter of a percentage point to the 4.50%-4.75% range. Interest rate cuts typically boost economic activity and energy demand.
U.S. weekly inventory reports were delayed by a day following Monday’s Veterans Day holiday. The American Petroleum Institute industry group data is expected at 4:30 p.m. EST (2130 GMT) on Wednesday.
Analysts estimated on average that crude inventories rose by about 100,000 barrels in the week to Nov. 8.
Analysis:
In summary, oil prices have seen a slight increase amidst near-term supply tightness, despite concerns over falling demand projections, particularly in China. OPEC’s revision of its global demand growth forecast has also impacted market sentiment. Additionally, the Federal Reserve’s recent interest rate cut and potential further cuts could influence economic activity and energy demand. Overall, these factors could have implications for both the oil market and broader financial landscape.
