Due to a forecast divergence between the International Energy Administration and the Organization of Petroleum Exporting Countries, as well as an uncertain demand outlook, crude oil prices fell on the global commodity market.
Trading data indicated that as markets start to consider the effects of the increased U.S. interest rates, which have lasted longer than anticipated, crude oil prices start to decline. The economy may suffer from the uncertainty around the US Federal Reserve’s decision to decrease interest rates, which would in turn limit the demand for oil.
At the last check early on Friday, West Texas Intermediate crude was down 0.7% to US$78.04/b, while Brent crude fell 0.6% to US$82.27 per barrel.
Nonetheless, strong estimates for the demand for petrol and crude indicate that the benchmarks for crude are set for their strongest week in over two months. Reuters said in a Friday report.
The Organization of the Petroleum Exporting Countries maintained its forecast for strong global oil demand growth in 2024, while Goldman Sachs expects solid U.S. fuel demand this summer, the report said.
“I wouldn’t be surprised to see oil prices head higher from here whilst the demand outlook continues to look rosier,” Reuters quoted Tim Waterer, chief market analyst at KCM Trade, as saying. “Much may depend on how the northern hemisphere summer demand picture plays out.”
The recent recovery in the benchmark Brent crude oil price is justified after energy agencies predicted a supply deficit on the oil market at least through the start of winter, Commerzbank said in a Friday note.
Brent crude has gained about US$7 in just over a week, recovering from losses after the Organization of the Petroleum Exporting Countries’ output cut decision, but a further price increase is not to be expected for the time being, the bank noted.
Based on forecasts by the International Energy Agency, the oil market will be undersupplied in the third quarter because the voluntary production cuts by the OPEC+ countries will still be fully in place.
The deficit could be even larger if certain countries reduce their overproduction. Meanwhile, OPEC expects the oil market to be undersupplied through the second half of 2024.
Crude oil processing figures for China are expected next week and are likely to weigh on sentiment, as they are already slightly below the year-ago level in the first four months, Commerzbank said.
