Oil prices gain as IEA forecasts robust global demand growth

January 19, 2024 (MLN): Global oil prices edged up on Friday after witnessing gains in the previous session after the International Energy Agency (IEA) forecasted strong growth in global oil demand, further buoyed by disrupted U.S. crude output.

Brent crude is currently trading at $78.6 per barrel, up by 0.06% on the day.

Meanwhile, West Texas Intermediate crude (WTI) is trading at $73.9 per barrel, up by 0.17% compared to the previous close.

Both benchmarks are on track to record a weekly gain due to potential supply disruptions.

Oil traders also worried about geopolitical risks in the Middle East.

The U.S. Energy Information Administration reported a larger-than-expected draw in crude inventories of 2.5 million barrels in the week ended January 12, as Reuters reported.

"The fear of another large build of total inventories has not materialized, modestly supporting prices," said Giovanni Staunovo, analyst at UBS.

The IEA monthly report said it expects oil demand to grow by 1.24 million barrels per day (bpd) in 2024, up 180,000 bpd from its previous projection.

On Wednesday, the Organization of the Petroleum Producing Countries (OPEC) said it expected demand growth of 2.25m bpd this year, unchanged from its forecast in December.

The producer group also said oil demand is expected to rise by a robust 1.85m bpd in 2025 to 106.21m bpd.

The IEA's executive director, Fatih Birol, told the Reuters Global Markets Forum he expects oil markets to be "comfortable and balanced" this year despite Middle East tensions, rising supply and slowing demand growth.

In the United States, about 40% of oil output in North Dakota's oil output remained shut in due to extreme cold weather and operational challenges, the top oil-producing state's pipeline authority said on Wednesday.

Last week, the United States produced another record of 13.3m barrels per day of crude oil, the EIA data showed.

Oil's range-bound trading in recent days reinforces the narrative that investors are shrugging off concern that tankers may be at risk from attacks in the Red Sea, said Ehsan Khoman, analyst at bank MUFG.

Oil tankers that had diverted away from the Red Sea have turned back and passed through the Bab al-Mandab Strait, ship-tracking data shows, though tensions in the region continued to disrupt global shipping and trade.

"The turmoil in the Mideast has kicked up freight and insurance rates appreciably but (has) not yet affected total global oil supply other than delaying shipments toward Europe and other regions," said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

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