Oil settle slightly up on forecasts for strong global demand

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices edged up to settle slightly higher on Tuesday as the U.S. Energy Information Administration (EIA) raised its global oil demand growth forecast for the year, while OPEC stuck to its forecast for relatively strong growth in 2024.

Brent crude futures rose 29 cents, or 0.4%, to settle at $81.92 a barrel, continuing a sharp recovery as fears of oversupply have ebbed since Brent closed at $77.52 a week earlier, its lowest since February.

U.S. West Texas Intermediate (WTI) crude futures gained 16 cents, or 0.2%, to settle at $77.90.

The EIA raised its 2024 world oil demand growth forecast to 1.10 million barrels per day from a previous estimate for a rise of 900,000 bpd.

The Organization of the Petroleum Exporting Countries (OPEC) maintained its 2024 forecast for relatively strong growth in global oil demand, citing expectations for travel and tourism in the second half.

This month, OPEC and allies agreed to extend most oil output cuts well into 2025 but said they would gradually phase out the cuts over the course of a year from October 2024.

“We’re now at least considering the idea that maybe demand will pick up in the second half, and the market may actually need some additional OPEC+ supply,” said Tim Evans, an independent energy analyst.

“The market was becoming somewhat oversold… We’re getting a bit of a trampoline effect,” Evans added.

U.S. crude oil output in 2024 is expected to rise more than previously forecast to 13.24 million barrels, its highest ever, EIA said.

U.S. crude oil stockpiles were expected to have fallen by slightly over one million barrels in the week to June 7, a preliminary Reuters poll showed. Data from industry group American Petroleum Institute is due later on Tuesday and from EIA on Wednesday.

The World Bank said the U.S. economy’s stronger-than-expected performance prompted it to lift its 2024 global growth outlook slightly, but warned overall output would remain well below pre-pandemic levels through 2026.

Mostly strong U.S. economic data and inflation still higher than the Fed’s target have pushed financial markets to limit expectations to only two 25-basis points rate reductions this year, likely starting in September. Economists have said there was a considerable risk of only one or no rate cuts in 2024.

U.S. consumer prices data for May and the conclusion of the Fed’s two-day policy meeting are both scheduled for Wednesday.

The European Central Bank should persist in restraining economic growth given the ample inflationary pressures and wait with its next rate cut until uncertainty recedes, ECB chief economist Philip Lane said on Tuesday.

Traders were also cautious a day ahead of the release of macroeconomic data from China.

Saudi crude exports to China fell for a third straight month.

Global crude oil and oil products shipments taking the long route between Asia, the Middle East and the West are up 47% since attacks began on vessels using the shorter Red Sea route, the EIA said.

Meanwhile, Hamas accepted a U.N. resolution backing a plan to end the war with Israel in Gaza and was ready to negotiate details, a senior official of the Palestinian militant group said, in what the U.S. Secretary of State called a hopeful sign.

(Reporting by Paul CarstenAdditional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Trixie Yap in Singapore Editing by Louise Heavens, David Goodman, Bill Berkrot and David Gregorio)


Close Bitnami banner