Oil prices showed resilience, maintaining stability on Thursday after substantial gains in the preceding session. Brent crude is currently trading at $74.69 per barrel, experiencing a marginal decline of 0.06 percent for the day. Meanwhile, West Texas Intermediate crude (WTI) is trading at $69.93 per barrel, down by 0.16 percent.
A larger-than-expected weekly withdrawal from US crude inventory and heightened expectations of robust demand contributed to the surge. This is further fueled by the US Federal Reserve (Fed) hinting at a cumulative rate cut of 75 basis points in 2024.
These developments followed a period where both benchmarks hit their lowest levels in six months. This half-year low was attributed to an unforeseen increase in consumer prices and concerns about oversupply.
Read: Oil prices hit six-month lows amid oversupply and global concerns
US economic metrics
The Fed has recently opted to maintain interest rates unchanged at 5.25 to 5.5 percent for the third consecutive meeting. Accompanying the Federal Open Market Committee (FOMC) statement were new projections. They anticipate higher gross domestic product (GDP) growth for the current year at 2.6 percent, compared to the September projection of 2.1 percent. In 2024, GDP could grow by 1.4 percent.
With lower interest rates, consumers will also have lower borrowing costs. This could potentially boost economic growth and oil demand. The news also led to a three-session dollar decline to a four-month low, making oil less expensive for foreign purchasers.
Oil prices were further influenced by a larger-than-expected draw from US crude inventory, with energy firms pulling 4.3 million barrels of crude from stockpiles during the week ending December 8. This is according to the US Energy Information Administration (EIA). However, analysts noted concerns about rising fuel inventories in the United States. This indicates a potential decline in winter demand and limits the overall upside of the market.
Positive forecast remains
In related news, the Organization of the Petroleum Exporting Countries (OPEC) maintained its positive forecast. It expects a robust global oil demand growth in 2024, holding steady at 2.25 million barrels per day (bpd). This projection follows the 2.46 million bpd demand growth witnessed this year.
Nonetheless, OPEC shared that it has a “cautiously optimistic” stance on oil market fundamentals in 2024, citing the recent slip in crude prices.
Oil prices have experienced a decline since October. Brent Crude fell to around $70 per barrel from its peak of over $90 per barrel in September. This downward trend persisted following the announcement of OPEC+ (comprising OPEC and its allies) regarding a new round of production cuts. These cuts will total 2.2 million bpd for the first quarter of 2024
For more markets news, click here.
