Crude oil hits more than four-month high as IEA forecasts market deficit (NYSEARCA:USO)
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Oil futures rose Thursday to settle at four-month highs as the International Energy Agency raised its forecast for oil demand growth this year while also forecasting a slight supply deficit through 2024, instead of a previously predicted surplus.
The IEA raised its 2024 demand growth estimate for crude oil by 110K bbl/day to 1.3M bbl/day, citing a stronger U.S. outlook and the increased need for fuels in shipping, as vessels take longer routes to avoid Houthi attacks in the Red Sea.
The amount of oil aboard ships at sea surged to nearly 1.9M barrels at the end of February, the second highest level since the height of the COVID-19 pandemic, according to the report.
Saudi Arabia and its OPEC+ partners agreed earlier this month to extend ~2M bbl/day of production curbs to the middle of the year, and the IEA now assumes the measures will continue until the end of 2024, so “the changed assumptions shift our implied balance into a slight deficit rather than the hefty build in last month’s report.”
The IEA’s outlook still marks a significant slowdown from last year’s demand growth of 2.3M bbl/day and contrasts with OPEC’s forecast for 2.2M bbl/day.
The IEA also lowered its 2024 oil supply forecast and now expects supply to rise by 800K bbl/day to 102.9M bbl/day this year.
Front-month Nymex crude (CL1:COM) for April delivery closed +1.9% to $81.26/bbl, and front-month May Brent crude (CO1:COM) finished +1.6% to $85.42/bbl, the highest settlement value for both benchmarks since November 2.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
The IEA report follows other factors that supported prices, including an unexpected draw this week on U.S. crude inventories and rising Ukrainian drone attacks on Russian oil infrastructure.
Damage to Russian refineries could cut the country’s gasoline production by more than 10%, BOK Financial’s Dennis Kissler told Reuters.
