Oil prices surged more than 3% on Thursday, building on gains from the previous session. The boost in oil prices was fueled by a weakened dollar and an upward revision in oil demand forecasts for the upcoming year by the International Energy Agency (IEA).
As of 11:30 a.m. EST (1630 GMT), Brent futures soared by $2.64, marking a 3.6% increase and reaching $76.90 per barrel. Concurrently, U.S. West Texas Intermediate (WTI) crude experienced a similar surge, rising $2.53 or 3.6% to $72.00 per barrel.
This upward trajectory follows a dip on Wednesday, which saw the market hitting a nearly six-month low. The resurgence of oil prices is attributed to multiple factors, including the weaker dollar and the optimistic outlook presented by the IEA.
According to the IEA’s monthly report, world oil consumption is anticipated to witness a rise of 1.1 million barrels per day (bpd) in 2024. This reflects an increase of 130,000 bpd from the agency’s earlier projection, citing improved prospects for the United States and a decrease in oil prices.
It’s noteworthy that the IEA’s 2024 estimate is significantly lower than the forecast made by the Organization of the Petroleum Exporting Countries (OPEC).
The recent fall in the dollar, triggered by the U.S. Federal Reserve signaling lower borrowing costs for 2024, has also contributed to the surge in oil prices. On Thursday, the dollar hit a fresh four-month low following the Fed’s economic projections, indicating the likely end of the interest rate hiking cycle and foreseeing lower borrowing costs in the coming year.
Phil Flynn, an analyst at Price Futures Group, commented on this shift, stating, “Obviously the mood for oil has changed dramatically. One of the major catalysts for shaking volatility out of the market was the Federal Reserve.”
Lower interest rates are expected to reduce consumer borrowing costs, potentially stimulating economic growth and increasing demand for oil. Additionally, a weakened dollar makes oil more affordable for foreign buyers.
Despite these positive developments, concerns loom for oil investors entering 2024. Worries about slowing economic growth and oversupply persist, while simmering tensions in the Middle East pose a potential threat to price stability.
Benchmark Brent has maintained an average of around $80 per barrel this year. According to a Reuters survey involving 30 economists and analysts, the projection for Brent crude in 2024 is an average of $84.43 per barrel. Investors and industry experts will closely monitor these factors as they navigate the dynamic landscape of the global oil market.
Source: Yahoo Finance
