Oil prices experienced an upward surge on Wednesday, primarily driven by optimistic expectations of robust global demand, particularly in the United States, the world’s leading consumer.
Brent futures for May delivery exhibited an increase of 36 cents, equivalent to 0.44%, reaching $82.28 per barrel by 0020 GMT. Simultaneously, the April U.S. West Texas Intermediate (WTI) crude contract saw a rise of 38 cents, or 0.49%, settling at $77.94.
The Organization of the Petroleum Exporting Countries (OPEC) played a pivotal role in fostering confidence in the oil market.
OPEC maintained its forecast of substantial global oil demand growth, projecting an increase of 2.25 million barrels per day (bpd) in 2024 and a further 1.85 million bpd in 2025.
Moreover, OPEC raised its economic growth forecast for the current year, indicating a positive outlook for the oil industry.
In a complementary trend, both U.S. crude oil inventories and fuel inventories witnessed a decline last week, as reported by market sources citing American Petroleum Institute figures. These developments underscored the resilience of demand in the oil market.
When and How the Federal Reserve Factors In
Amidst these market dynamics, analysts closely observed the Federal Reserve’s stance, particularly in light of somewhat persistent U.S. inflation.
Despite solid increases in U.S. consumer prices in February, attributed to higher costs for gasoline and shelter, the expectations of a Federal Reserve rate cut persisted.
The consensus among analysts suggests that the Federal Reserve might initiate rate cuts as early as summer. Lower interest rates are anticipated to bolster oil demand, contributing to the positive sentiment in the oil market.
Factors Influencing Oil Prices
While the U.S. Energy Information Administration raised its domestic oil output forecast in the preceding session, this development did not exert sustained downward pressure on oil prices.
The limited impact can be attributed to ongoing expectations that OPEC+ output cuts will continue to curtail global oil growth.
Additionally, a recent wave of drone attacks on Russia, including refineries, has introduced geopolitical uncertainties, adding an element of support to oil prices. The intricate interplay of these factors highlights the complexity of the current oil market landscape.
