Oil prices firm on upbeat demand growth forecasts

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London, Aug. 11, 2023 – Oil prices gained ground on Friday amid optimistic demand forecasts from the OPEC producer group and the International Energy Agency (IEA).

Brent crude was up 49 cents, or 0.6%, at $86.89 a barrel at 1118 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 49 cents, or 0.6%, at $83.31.

Both benchmarks have been on a sustained rally since June with WTI trading on Thursday at its highest this year and Brent hitting its highest since late January.

The IEA on Friday warned that global inventory could fall sharply over the rest of 2023, potentially driving prices even higher, though the agency expects demand growth to slow to 1 million barrels per day (bpd) in 2024, down 150,000 bpd from its previous forecast.

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said it expects global oil demand to rise by 2.25 million bpd in 2024, compared with growth of 2.44 million bpd this year.

Both forecasts were unchanged from last month.

In 2024 “solid” economic growth amid continued improvements in China is expected to boost oil consumption, it added.

“Demand is reassuringly upbeat.

“These cheerful projections suggest that OPEC is sanguine on global economic prospects,” PVM oil analyst Tamas Varga said.

Market sentiment was also lifted by Thursday’s U.S. consumer prices data for July, which fuelled speculation that the Federal Reserve is is nearing the end of its aggressive rate hike cycle.

On the supply side, prices have been supported by extensions to output cuts by Saudi Arabia and Russia alongside supply fears driven by the potential for conflict between Russia and Ukraine to disrupt Russian oil shipments in the Black Sea region.

Mixed economic data from China weighed on sentiment, however.

While customs data showed crude imports up year on year, China’s overall overall exports plunged 14.5% in July, with monthly crude imports retreating from June’s near-record highs to their lowest level since January.

Data this week also showed China’s consumer prices fell into deflation and factory gate prices extended declines in July, raising concerns about fuel demand in the world’s second-largest economy. (Reuters)

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