Dustin Josey makes his way across the gangplank as he leaves Shell’s Vito platform as workers continue construction on the project at the Kiewit Offshore Services complex Wednesday, April 6, 2022 in Ingleside. (Photo by Brett Coomer/Houston Chronicle via Getty Images)
Brett Coomer | Houston Chronicle | Hearst Newspapers | Getty Images
Oil prices surged more than 3% today, adding to yesterday’s gains driven by a slightly improved global demand outlook for 2024 and a weaker dollar.
The West Texas Intermediate contract for January gained $2.50, or 3.60%, to trade at $71.96 a barrel, while the Brent contract for February rose $2.58, or 3.47%, to $76.84 a barrel.
Oil prices settled more than 1% higher Wednesday on a 4.3 million barrel withdrawal from U.S. crude inventories, a figure that exceeded expectations.
The International Energy Agency announced Thursday that global oil demand would grow by 1.1 million barrels per day in 2024, a slight increase from its previous forecast of 930,000 barrels per day.
Experts are also buoyed by the Federal Reserve’s decision to ease traders’ concerns over inflation. The central bank signaled three rates cuts for 2024, potentially boosting oil demand next year. Higher interest rates typically slow economic growth and weigh on crude prices.
The U.S. dollar dropped to a four-month low Thursday after the Fed indicated that the rate hikes were over. A weaker dollar makes oil cheaper, potentially lifting demand.
This week’s gains offer some relief from a brutal fall. Since September, oil prices have plunged more than $20 through Wednesday’s close due to record U.S. production and a weakening economy in China, raising concerns over an oversupplied market.
While several OPEC members and allies like Russia have pledged to cut supply by 2.2 million barrels per day in the first quarter of 2024, traders remain skeptical about the promised reductions. Voluntary cuts often fall short of expectations.
OPEC partly blamed “exaggerated concerns about oil demand growth” for the sharp decline in crude prices in the group’s December market report.
On the other hand, the International Energy Agency predicts that demand growth will slow by half in 2024, with the U.S., Brazil, and Guyana pumping “record-breaking supply.” Growth in production outside OPEC is expected to exceed demand by 1.2 million bpd, posing a challenge to key producers aiming to maintain elevated oil prices.
“The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices,” the IEA said, apparently referring to OPEC.
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