By Adedapo Adesanya
Crude oil edged higher on Friday after the International Energy Agency (IEA) forecast record global demand and tightening supplies, with Brent rising by 41 cents or 0.5 per cent to settle at $86.81 a barrel, and the US West Texas Intermediate (WTI) appreciating by 37 cents or 0.5 per cent to $83.19.
On a weekly basis, both benchmarks rose about 0.5 per cent.
The IEA noted that global oil demand would hit new highs and is expected to average 102.2 million barrels per day this year, driven by summer air travel, strong Chinese petrochemical activity, and higher oil use in power generation.
World oil demand is set to grow by 2.2 million barrels per day this year, with China accounting for more than 70 per cent of growth, the agency said in its closely-watched Oil Market Report (OMR) for August.
The growth estimate is unchanged from last month’s report, in which the IEA cut its global oil demand growth forecast for the first time this year due to persistent economic headwinds.
Demand in developed economies was revised up for May and June, with overall consumption returning to growth in the second quarter after two-quarters of contraction.
Moreover, Chinese demand was also stronger than expected, reaching fresh highs despite persistent concerns over its economy.
The agency, however, cut today its estimate for global oil demand growth for 2024 by around 150,000 barrels per day and sees next year’s growth slowing to 1 million barrels per day year over year.
“With the post-pandemic rebound running out of steam, and as lacklustre economic conditions, tighter efficiency standards and new electric vehicles weigh on use, growth is forecast to slow to 1 mb/d in 2024,” the agency said in the report.
Meanwhile, output cuts from Saudi Arabia and Russia set the stage for a sharp decline in inventories over the rest of 2023, which IEA said could drive oil prices even higher.
On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) said it expects global oil demand to rise by 2.44 million barrels per day this year, unchanged from its previous forecast. It added that prospects for the oil market look healthy for the second half of the year.
This week’s economic data from the US also lifted market sentiment, fueling speculation that the Federal Reserve is nearing the end of aggressive rate hikes.
Market analysts noted that the supply cuts and an improving economic outlook have created more optimism among oil investors.
The number of oil rigs operating in the US, an early indicator of future output, held steady at 525 this week, energy services firm Baker Hughes said, after falling for eight weeks in a row.
The steady oil rig count indicates US producers are maintaining discipline in drilling and exploration.