Oil Prices Fall as China Fails to Impress Markets.
Originally uploaded on March 15, 2024
Oil prices were mixed this week as the International Energy Agency warned of a potential supply deficit throughout the year applying upward pressure on oil prices. However, this was largely offset by demand concerns out of China which dampened the momentum.
Brent crude traded above $84.50 a barrel to the highest intraday level in six weeks. The IEA reversed its previous expectations of a surplus as OPEC+ looks set to continue output cuts in the second half of the year.
There could still be a surplus in the second half, “depending on when the alliance does unwind the cuts, by how much, and the pace of it,” Toril Bosoni, head of the agency’s oil market division, said in an interview with Bloomberg TV.
The IEA bolstered forecasts for world oil demand growth in 2024 by 110,000 barrels to 1.3 million barrels a day, on a stronger US outlook and the increased need for ship fuel, as vessels take longer routes to avoid Houthi attacks in the Red Sea.
In the US, inventories dropped for the first time in seven weeks, including a fall at the hub in Cushing, Oklahoma. Meanwhile, geopolitical tensions remain elevated after this week’s Ukrainian drone strikes on Russian oil refineries.
Ukraine struck oil refineries in a second day of heavy drone attacks, causing a fire at Rosneft's biggest refinery in what Russian President Vladimir Putin said was an attempt to disrupt his country’s presidential election this week.
“As Russian refining capacity is damaged by Ukrainian drone strikes, this can result in Russia exporting less diesel fuel with a potential for Russia to start importing petrol and that of course will affect prices around the world,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Oil and the wider financial markets also found support from sentiment that the latest data on US inflation will not derail interest rate cuts by midyear.
Lower rates can boost economic growth and support oil demand. The Organization of the Petroleum Exporting Countries, meanwhile, stuck to its forecast for oil demand growth of 2.25 million barrels per day in 2024, higher than many other forecasts.
Meanwhile in China oil demand was firmly back in the spotlight as worries over weak demand outweighed the bullish sentiment from the US.
The worries came after the research arm of state-owned Chinese energy major CNPC forecast last week that China is entering a slow oil demand period thanks to the uptake of electric cars and LNG-fuelled trucks.
Growth in EV sales and LNG-powered trucks would shave between 10% and 12% off the country’s demand for gasoline and diesel just this year, Lu Ruquan, president of CNPC’s Economics and Technology Research Institute, said last Friday
The mixed outlook offers some good news for fuel card users as prices are expected to fall in the region of .70 pence per litre for next week.