
Oil Settles Higher on Strong Demand Forecasts – Reuters
By Arathy Somasekhar
HOUSTON (Reuters) – Oil prices experienced a slight increase on Tuesday following an updated forecast from the U.S. Energy Information Administration (EIA), which raised its global oil demand growth prediction for the year. Additionally, OPEC maintained its outlook for solid growth in 2024.
Brent crude futures rose by 29 cents, or 0.4%, settling at $81.92 per barrel, marking a significant recovery after concerns about an oversupply diminished. The price was notably higher than the previous week’s close of $77.52, the lowest since February.
Meanwhile, U.S. West Texas Intermediate (WTI) crude futures increased by 16 cents, or 0.2%, to $77.90.
The EIA boosted its 2024 global oil demand growth estimate to 1.10 million barrels per day, an increase from the prior forecast of 900,000 bpd. OPEC also affirmed its projection of robust global oil demand growth for 2024, attributing it to expected increases in travel and tourism in the latter half of the year.
Earlier this month, OPEC and its allies decided to extend most oil production cuts until 2025, but indicated that they would gradually reduce these cuts starting in October 2024.
Tim Evans, an independent energy analyst, remarked, "We’re now at least considering the idea that maybe demand will pick up in the second half, and the market may actually need some additional OPEC+ supply." He noted that the market had been somewhat oversold, leading to a rebound effect.
The EIA also predicted that U.S. oil output in 2024 would exceed previous forecasts, reaching a record high of 13.24 million barrels per day.
In other developments, U.S. crude oil stocks reportedly declined by 2.428 million barrels in the week ending June 7, according to market sources citing data from the American Petroleum Institute. A preliminary poll suggested inventories were expected to decrease by just over one million barrels during that period.
The World Bank updated its 2024 global growth outlook slightly higher, driven by stronger-than-expected U.S. economic performance, although it cautioned that overall output would still lag behind pre-pandemic levels through 2026.
Positive U.S. economic data alongside inflation remaining above the Federal Reserve’s target has led financial markets to anticipate only two 25-basis point interest rate cuts this year, likely commencing in September. Economists have indicated a significant risk for possibly only one or no rate cuts in 2024.
U.S. consumer price data for May and the conclusion of the Federal Reserve’s two-day policy meeting are both set to be released on Wednesday.
The European Central Bank is expected to maintain its current monetary stance due to substantial inflationary pressures and will likely postpone its next rate cut until uncertainty wanes, according to ECB chief economist Philip Lane.
Traders also remained cautious in anticipation of upcoming macroeconomic data from China, where Saudi crude exports to the country have declined for the third consecutive month.
The EIA reported that global shipments of crude oil and oil products taking longer maritime routes between Asia, the Middle East, and the West have surged by 47% since assaults began on vessels using the shorter Red Sea route.
In a related geopolitical development, a senior official from Hamas stated that the group has accepted a U.N. resolution supporting a plan to end the conflict with Israel in Gaza and is prepared to negotiate the specifics, which was described by the U.S. Secretary of State as a positive indicator.