Oil prices rebounded from earlier losses on Thursday, February 15 on the back of a weak dollar, but an International Energy Agency (IEA) report flagging slowing demand growth this year and a larger-than-expected jump in US crude inventories capped gains.
Brent crude futures were up 53 cents, or 0.7 per cent, to $82.13 a barrel by 1456 GMT. US West Texas Intermediate crude futures gained 52 cents, or 0.7 per cent, at $77.16, according to news agency Reuters. Both oil benchmark contracts lost more than $1 per barrel on Wednesday, pressured by the rise in US crude inventories as refining dropped to its lowest levels since December 2022.
What’s driving crude oil prices?
-The US dollar index slid 0.4 per cent after data showed US retail sales fell more than expected in January. A weaker dollar usually boosts oil prices as it makes the commodity cheaper for holders of other currencies.
-Retail sales dropped 0.8 per cent last month, the Commerce Department’s Census Bureau said on Thursday. Data for December was revised lower to show sales rising 0.4 per cent instead of 0.6 per cent, as previously reported.
-Further oil price gains were limited by an IEA report on Thursday which said that global oil demand is losing momentum, prompting the agency to trim its 2024 growth forecast to 1.22 million barrels per day (bpd) from 1.24 million bpd. On the supply side, the IEA estimated that supply will grow by 1.7 million bpd this year, up from its previous forecast of 1.5 million bpd.
-The Energy Information Administration (EIA) said US crude inventories jumped by 12 million barrels to 439.5 million barrels in the week to February 9, far exceeding the rise of 2.6 million barrels expected by analysts in a Reuters poll.
-Two major economies slipping into recession also weighed on prices. Britain fell into recession in the second half of 2023 when its gross domestic product (GDP) contracted by 0.3 per cent in the fourth quarter, having shrunk by 0.1 per cent in the third quarter. Japan unexpectedly slipped into recession at the end of last year, surrendering its title as the world’s third-biggest economy to Germany.
-The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for both years saying there was further upside potential.
-OPEC said in its monthly report that the world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. Both forecasts were unchanged from last month. A further boost to economic growth could give additional tailwind to oil demand.
-OPEC’s 2024 demand growth forecast is already higher than that of other forecasters such as the IEA, although the wider OPEC+ alliance is still cutting output to support the market. OPEC said a “positive trend” for economic growth was expected to extend into the first half of 2024 and raised its economic growth forecasts for 2024 and 2025 by 0.1 percentage points.
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