Oil prices experienced a slight decline on Friday but were poised to register a gain of nearly 4 percent for the week. This increase was attributed to significant drops in U.S. crude and fuel inventories, drone attacks on Russian refineries, and higher energy demand forecasts, all of which contributed to buoying prices.
At 12:34 GMT, Brent crude oil futures for May dropped by 41 cents, or 0.5 percent, settling at $85.01 per barrel. This followed the crossing of the $85 per barrel mark on Thursday, the first time since November. Similarly, U.S. West Texas Intermediate (WTI) crude for April fell by 32 cents, or 0.4 percent, to $80.94.
The International Energy Agency (IEA) raised its oil demand growth projection for 2024 for the fourth time since November due to attacks disrupting Red Sea shipping. The IEA’s latest report indicated an estimated increase of 1.3 million barrels per day (bpd) in world oil demand for 2024, up by 110,000 bpd from the previous month’s forecast. It also predicted a modest supply deficit for this year, following the extension of cuts by OPEC+ members, instead of the previously projected surplus.
Furthermore, oil prices were supported by drone attacks on Russian oil refineries, which occurred for a second consecutive day.
The Energy Information Administration (EIA) reported an unexpected decline in U.S. crude oil stockpiles last week, attributed to increased refinery activity and a decrease in gasoline inventories due to rising demand.
Potential impact on oil demand
On the demand side, China’s central bank was expected to maintain its key policy rate when renewing medium-term loans, according to a Reuters survey. This decision was anticipated to keep consumer borrowing costs low, potentially stimulating economic growth and driving up oil demand.
Although there were indications of a slowdown in economic activity in the United States, it was unlikely to prompt the Federal Reserve to initiate interest rate cuts before June. This assessment was supported by other data showing a larger-than-expected increase in producer prices the previous month.
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