Oil snaps losing streak, eyes first weekly gain in 8 weeks

December 15, 2023 (MLN): Global oil prices continued their rally on Friday as the International Energy Agency (IEA) raised its oil demand forecast for next year, and a weaker dollar further contributed to the gains.

Brent crude is currently trading at $77.05 per barrel, up by 0.41% on the day.

While West Texas Intermediate crude (WTI) is trading at $72.016 per barrel, up by 0.34% on the day.

It is important to mention that prices have experienced a turnaround after dropping to hit their lowest point in nearly six months and are on track for their first weekly gain in the last eight weeks.

The gains are mainly attributed to a weaker dollar following the U.S. Fed's hint of cutting rates by 75 basis points in 2024.

World oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for the U.S. and lower oil prices, as Reuters reported.

The 2024 estimate is less than half the forecast of the Organization of the Petroleum Exporting Countries (OPEC).

Prices also got a boost as the dollar weakened after the U.S. Federal Reserve on Wednesday signaled lower borrowing costs for 2024.

The dollar fell to a four-month low on Thursday after the U.S. central bank indicated interest rate hikes have likely ended and lower borrowing costs are coming in 2024.

"Obviously the mood for oil has changed dramatically. One of the major catalysts for shaking volatility out of the market was the Federal Reserve," said Phil Flynn, an analyst at Price Futures Group.

Lower interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil. A weaker dollar makes oil less expensive for foreign purchasers.

The European Central Bank, meanwhile, pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.

Oil investors will usher in 2024 with gnawing concerns about slowing economic growth and oversupply while simmering tensions in the Middle East could spark price volatility.

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