Crude oil prices extended their gains early on Friday morning as a combination of demand optimism and rising geopolitical risk added to upward pressure. If the recent rally doesn't reverse today, oil prices could be on course to break a seven-week losing streak.
"Oil prices may see a bit of a 'demand pull' due to improved liquidity conditions after the Fed's dovish pivot," OANDA analyst Kelvin Wong told Reuters, commenting on the latest Fed update that suggested a rate cut may be on the table for 2024.
The International Energy Agency meanwhile did an inadvertent favor to OPEC with its latest monthly report, in which it said oil demand was going to expand more than previously expected in 2024.
Demand growth is slowing down this quarter, the agency said in its Oil Market Report for December, and revised down its Q4 consumption growth forecast by nearly 400,000 bpd, with Europe making up more than half of the downward revision.
Yet for next year, the IEA was quite bullish, revising its November demand growth prediction for 2024 by 130,000 bpd, to 1.06 million bpd in total. This is significantly lower than the demand growth rate that OPEC has forecast for 2024, which stands at 2.2 million bpd, but still a substantial number.
Meanwhile, one of the largest tanker companies, Maersk Tankers, has told its fuel carrier crews they can bypass the Red Sea from now on amid a series of missile and drone attacks on vessels in the area from the Yemeni coast. If carriers choose to bypass the Red Sea, it will also bypass the Suez Canal and add thousands of miles to their journeys, opting to sail around Africa instead.
Even with the heightened geopolitical risk in the Middle East, the tensions between Venezuela and Guyana, and the bullish IEA report, oil prices have only registered modest gains. Some analysts attribute it to growth in non-OPEC supply.
"Despite the recent recovery, crude prices remain relatively close to recent lows" Kotak Securities' head of commodity research, Ravindra Rao, told Bloomberg. "Even with recent production cuts by OPEC+, projections of higher non-OPEC supply led by the US may act as a limiting factor on further price gains."
Early on Friday morning, WTI was up 0.24% at $71.75 while Brent was trading 0.26% higher at $76.81.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
U.S. Power and NatGas Prices Plummet to Below Zero
Ukrainian Drones Hit Major Rosneft Refinery in Russia
First Niger Oil Bound for China Blocked in West Africa Border Row
Gas Prices Likely to Keep Falling Ahead of Peak Driving Season
Drone Attacks Take Khor Mor Gas Field Offline, Claims Lives