Oil prices declined on Friday, March 16, a day after topping the $85 per barrel-mark for the first time since November, but prices settled almost three per cent higher for the week on higher demand from US refiners and the oil demand projections for 2024 by the International Energy Agency (IEA).
Benchmark Brent crude last traded near $85 per barrel, after advancing 4.3 per cent over the previous two sessions and reaching the highest level since November on Thursday. US West Texas Intermediate (WTI) crude was down 17 cents or 0.21 per cent to $81.09.
Prices had been range-bound for much of the last month roughly between $80 to $84 a barrel. Coming to domestic prices, crude oil futures last settled 0.15 per cent lower at ₹6,730 per barrel on the Multi Commodity Exchange (MCX).
What’s pushing crude oil prices?
-On Thursday, the IEA raised its view on 2024 oil demand for a fourth time since November as Houthi attacks have disrupted Red Sea shipping. The IEA has adjusted its forecast for global demand growth upwards by 110,000 barrels per day (bpd), bringing the total to 1.3 million bpd.
-US energy firms this week added the biggest number of oil and natural gas rigs in a week since September, with the oil rig count also rising to its highest in six months, energy services firm Baker Hughes, said a Reuters report.
-The oil and gas rig count, an early indicator of future output, rose by seven to 629 in the week to March 15. Baker Hughes said oil rigs rose six to 510 this week, their highest since September, while gas rigs rose one to 116, according to Reuters.
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-The gains this week have come despite the US dollar strengthening at its fastest pace in eight weeks. A stronger dollar makes crude more expensive for users of other currencies. Cuts in interest rates are seen as opportunity for demand growth in the US.
-In the US, some signs of slowing economic activity were seen as unlikely to spur the Federal Reserve to start cutting interest rates before June as other data on Thursday showed a larger-than-expected increase in producer prices last month.
-US crude oil stockpiles also fell unexpectedly last week as refineries ramped up processing while gasoline inventories slumped as demand rose, said the Energy Information Administration (EIA). Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.
-Also supporting oil prices prices were the Ukrainian drone strikes on Russian oil refineries, which caused a fire at Rosneft’s biggest refinery in one of the most serious attacks against Russia’s energy sector in recent months.
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Where are prices headed?
Oil prices have surged to a peak not seen in four months as of Thursday, following the IEA’s updated forecast, which now anticipates a higher demand growth for oil this year, said analysts. Contributing to the rise in crude oil prices are the Ukrainian assaults deep within Russia, which have incapacitated approximately 12 per cent of Russia’s total capacity for processing oil.
‘’Market analysts foresee a continuation of volatility in crude oil prices for today’s trading session. Currently, crude oil is finding support at the $79.50–$78.90 range, with resistance levels anticipated at $81.30–$82.0. When priced in INR, crude oil is supported at ₹6,670– ₹6,600, while facing resistance at ₹6,810– ₹6,890,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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