Oil Dips But Achieves Weekly Gain on Strong 2024 Demand Outlook

By Nicole Jao

NEW YORK (Reuters) – Oil futures prices experienced a slight decline on Friday following a survey that indicated a drop in U.S. consumer sentiment. Despite this, prices rose by 4% over the week, as investors considered predictions of robust demand for crude oil and fuel in 2024.

Futures settled 13 cents lower at $82.62 a barrel, while West Texas Intermediate (WTI) futures dropped 17 cents to $78.54. Both benchmarks recorded nearly 4% gains for the week, marking the highest percentage increase since April.

The drop in prices was influenced by a survey revealing that U.S. consumer sentiment fell to a seven-month low in June. Bob Yawger, director of energy futures at Mizuho, commented, "The data came in way lower than expected. That implies the average consumers don’t have confidence that the economic situation is improving."

However, forecasts for strong demand helped to mitigate losses. The U.S. Energy Information Administration (EIA) slightly upgraded its oil demand growth estimate for 2024, while the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for a substantial growth of 2.2 million barrels per day (bpd). Conversely, the International Energy Agency (IEA) downgraded its demand growth forecast to under 1 million bpd.

Despite differing demand outlooks, all three forecasters predicted a supply deficit at least until the onset of winter, as noted by analysts from Commerzbank. Additionally, this week the U.S. Federal Reserve decided to keep interest rates unchanged, with investors considering rate cuts unlikely before December.

Commerzbank analyst Barbara Lambrecht stated, "In view of the still uncertain economic outlook for the major economic regions, a further price increase is not to be expected for the time being."

The active U.S. oil rig count, an indicator of future output, decreased by four to 488, reaching its lowest level since January 2022, according to energy services firm Baker Hughes.

In related news, Russia affirmed its commitment to fulfill its output obligations under the OPEC+ agreement, following a declaration that it exceeded its quota in May. Prices dipped last week after OPEC and its allies announced plans to gradually reduce output cuts starting in October.

"PVM analyst John Evans remarked, ‘No matter how many times it promises to make up for poor compliance at a future date, the market just sees more oil and an agreement that might just possibly unravel.’"

Market attention is also directed towards ceasefire negotiations in Gaza, as a resolution could alleviate concerns regarding potential disruptions to oil supply from the region. Additionally, data from the U.S. Commodity Futures Trading Commission (CFTC) indicated that money managers increased their net long positions in U.S. crude futures and options in the week leading to June 11.