Global Demand Concerns: Oil Prices Rally

Global Demand Concerns: Oil Prices Rally

February 15, 2024

Crude oil futures showed resilience on Thursday, bouncing back from earlier losses linked to a dim global demand outlook for 2024. The West Texas Intermediate (WTI) contract for March climbed $1.61, or 2.10%, to $78.25 per barrel, while the Brent contract for April rose to $83.05 per barrel, up by $1.45, or 1.78%. A weakening dollar, driven by disappointing January U.S. retail sales, lent support to oil prices, according to Phil Flynn, an analyst with the Price Futures Group.

Initially, futures saw declines of around 1% during the trading session following the Paris-based International Energy Agency's (IEA) forecast of modest demand growth of 1.2 million barrels per day (bpd) for 2024, nearly half of the 2.3 million bpd growth seen in 2023. Conversely, supply is expected to outstrip demand, with a projected growth of 1.7 million bpd this year, largely due to increased production in the U.S., Brazil, Canada, and Guyana, as outlined in the IEA's February oil market report.

Despite the subdued demand growth projection for 2024, Tamas Varga, an analyst at oil broker PVM, suggested that global oil inventories are set to decline throughout the year if OPEC maintains low output levels as anticipated. However, conflicting expert analyses influence market dynamics, with OPEC forecasting a tighter oil market characterized by demand growth outpacing production expansion outside the cartel. Heightened geopolitical tensions, such as Israel's bombing of Lebanon and stalled ceasefire talks in Gaza, further contribute to market fluctuations and investor sentiment.

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