Geopolitical concerns contribute to apprehensions about potential disruptions in global oil supply, countering anxieties over the demand outlook.
In the latest development, oil prices concluded higher, securing a weekly gain as escalating tensions in the Middle East continued to raise concerns about potential disruptions in the global oil supply. This comes at a time when uncertainties regarding the demand outlook persist.
As of 14:30 ET (19:30 GMT), West Texas Intermediate crude futures experienced a 1.5% increase, reaching $79.19 per barrel. Concurrently, Brent oil futures for April delivery rose by 0.6%, settling at $83.35 a barrel.
The ongoing tensions in the Middle East, responsible for a third of the world’s oil output, remained a focal point. Israel’s offensive in Rafa, the southern city of Gaza, and Hezbollah chief Hassan Nasrallah’s commitment to escalating the battle with Israel kept concerns alive.
Fresh worries about potential disruptions in the region played a pivotal role in boosting sentiment towards oil prices. This offset concerns about a prolonged period of elevated interest rates in the U.S., which could dent economic growth.
On Friday, the U.S. Labor Department reported that the producer price index (PPI) rose by 0.3% last month, following a revised decline of 0.1% in December. Economists had anticipated a 0.1% increase. Stifel noted that the hotter-than-expected PPI report, following a similarly robust consumer price report earlier in the week, led to reduced odds of a rate cut in May, dropping from 53% to 35% compared to the previous week.
Adding to the global economic concerns, both the U.K. and Japan officially entered a technical recession in the fourth quarter of 2023, according to GDP data.
The prevailing unease about worldwide economic growth coincides with the International Energy Agency’s (IEA) recent report indicating a slowdown in global oil demand. The IEA adjusted its 2024 global oil growth forecast to 1.22 million barrels per day (bpd), down from the previous estimate of 1.24 million bpd. Additionally, the agency forecasted increased supplies in 2024, citing record-high U.S. production and a reluctance among members of the Organization of the Petroleum Exporting Countries (OPEC) to implement deeper supply cuts. The IEA anticipates supply to grow by 1.7 million bpd in 2024, up from its earlier projection of 1.5 million bpd.
