Oil prices rise on signs of global demand strengthening

March 13, 2024 (MLN): Oil prices rose on Wednesday amidst anticipations of robust global demand, coupled with the latest US inflation data which did not alter expectations that Federal Reserve might start cutting rates soon.

Brent crude traded near $82.42 per barrel, up by 0.61% on the day.

While West Texas Intermediate crude (WTI) was at $78.07 per barrel, up by 0.66% on the day.

The U.S. consumer price index (CPI) for February 2024 rose by 3.2% YoY, as compared to the 3.1% YoY in January, and slightly higher than the market expectations of 3.1%

CME FedWatch Tool shows a 66.27% chance of interest rate cate by the US Federal Reserve in June 2024.

Analysts still believe the Federal Reserve may start cutting rates in the summer despite U.S. consumer prices rising solidly in February on higher costs for gasoline and shelter, suggesting some stickiness in inflation, as Reuters reported.

Lower rates support oil demand.

"The risk environment has largely stayed unfazed, riding on the firm belief that current market pricing for a rate cut only in June will do the job," said Yeap Jun Rong, market strategist at IG.

The Organization of the Petroleum Exporting Countries stuck to its forecast of a strong oil demand growth globally of 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025 and raised its economic growth forecast for this year.

In another indication of healthy demand, U.S. crude oil inventories and fuel inventories fell last week, according to market sources citing American Petroleum Institute figures.

The unexpected slide in U.S. crude inventories and strong growth forecasts by OPEC also supported prices, said Yeap.

In a note to clients, analysts at Capital Economics said they still forecast the Fed to start easing policy "around June."

Oil prices were under pressure in the previous session after the U.S. Energy Information Administration raised domestic oil output forecast but declines were limited on expectations that OPEC+ output cuts will still slow global oil growth and on the recent wave of drone attacks on Russia, including refineries.

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