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Oil Prices Increase After IEA Forecasts Record Global Demand

Oil prices experienced an upward trend on Friday, marking a fourth consecutive week of gains. The increase came after the International Energy Agency (IEA) predicted that global demand would reach a record high this year, mainly due to China's recovering consumption.


OPEC+ Output Cuts May Worsen Supply Deficit

The IEA warned that the deep output cuts announced by OPEC+ could exacerbate an oil supply deficit and negatively impact consumers. OPEC+ consists of the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia.

Brent Crude and WTI Futures Post Gains

Brent crude futures settled at $86.31 a barrel, while West Texas Intermediate (WTI) crude futures settled at $82.52 a barrel. Both contracts reported four weeks of gains, with Brent posting a 1.5% weekly increase and WTI rising 2.4%.

IEA: Chinese Consumption Drives Record Oil Demand

The IEA's monthly report revealed that global oil demand would grow by 2 million barrels per day (bpd) in 2023, reaching 101.9 million bpd. The majority of this growth is driven by stronger consumption in China following the lifting of COVID restrictions.

Jet Fuel Demand Accounts for Major Gains

According to the IEA, jet fuel demand is expected to account for 57% of the 2023 gains.

OPEC Flags Downside Risks to Oil Demand

OPEC highlighted potential downside risks to summer oil demand, which informed their decision to cut output further by 1.16 million bpd. The IEA stated that this decision could harm consumers and global economic recovery.

Expected Global Oil Supply Decline

The IEA expects global oil supply to decrease by 400,000 bpd by the end of the year, citing an anticipated 1 million bpd production increase outside of OPEC+ starting in March, compared to a 1.4 million bpd decline within the producer bloc.

Rising Demand and Supply Tightness

John Kilduff, the partner at Again Capital LLC, noted that the narrative of increasing demand and relative supply tightness is what keeps oil prices buoyed.

U.S. Oil and Gas Rig Count Declines

Supporting the price increase, the U.S. oil and gas rig count—an indicator of future supply—fell for the third consecutive week, as reported by Baker Hughes data.

U.S. Dollar Index and Oil Prices

The U.S. dollar index traded at approximately a one-year low. Still, it edged up on Friday, making dollar-denominated oil more expensive for investors holding other currencies and limiting oil price growth.