Oil Prices Rally On Bullish Forecast And Weaker Dollar, Set For First Weekly Gain In Two Months
In early Asian trade on Friday, oil prices surged, poised to achieve their first weekly gain in two months, fueled by a positive outlook on oil demand from the International Energy Agency (IEA) for the coming year and a decline in the value of the dollar.
According to Reuters, Brent futures experienced a 9-cent increase, reaching USD 76.70 a barrel at 0006 GMT, while US West Texas Intermediate (WTI) crude climbed by 10 cents to USD 71.68.
Both benchmarks are on track for a modest weekly gain, buoyed by the mid-week announcement from the U.S. Federal Reserve signalling a likely reduction in borrowing costs in the upcoming year.
The US dollar touched a four-month low on Thursday following indications from the US central bank that interest rate hikes are likely behind us, and lower borrowing costs are anticipated in 2024. A weaker dollar typically results in cheaper dollar-denominated oil for foreign buyers.
The European Central Bank countered expectations of immediate interest rate cuts on Thursday by affirming its commitment to keeping borrowing costs at record levels, despite lower inflation expectations.
The International Energy Agency's monthly report added to the positive sentiment, forecasting a rise of 1.1 million barrels per day (bpd) in world oil consumption in 2024. This is an increase of 130,000 bpd from its previous estimate, attributing the boost to an improved outlook for US demand and lower oil prices.
It is worth noting that the IEA's 2024 estimate is considerably lower than the demand growth forecast of 2.25 million bpd projected by the Organization of the Petroleum Exporting Countries (OPEC).
However, concerns linger as weak economic data from China, the world's second-largest oil consumer, has been weighing on oil prices in recent weeks. Investors are closely watching the release of monthly data on Chinese retail sales, industrial production, business investment, unemployment, and house prices for November later on Friday, hoping for signs of economic recovery.
As oil markets react to a combination of global economic factors, the coming weeks will likely see continued volatility, with market participants keeping a keen eye on developments influencing both supply and demand dynamics.
