Oil prices experienced a slight dip on Friday, retracing from recent highs after breaching the $85 mark earlier in the week. Despite the pullback, oil markets remained poised to record nearly a 4% gain for the week, propelled by various factors including supply disruptions, geopolitical tensions, and bullish demand forecasts.
Brent crude oil futures for May relinquished 41 cents, or 0.5%, settling at $85.01 a barrel by 1234 GMT, following a milestone breach of $85 on Thursday. Similarly, U.S. West Texas Intermediate (WTI) crude for April slid 32 cents, or 0.4%, to $80.94.
The International Energy Agency (IEA) provided additional impetus to oil prices by revising its 2024 oil demand growth forecast upwards for the fourth time since November. Citing disruptions in Red Sea shipping due to Houthi attacks, the IEA projected a 1.3 million barrels per day (bpd) increase in global oil demand for 2024, up by 110,000 bpd from its previous estimate.
Geopolitical tensions further fueled market sentiment as Ukraine launched drone strikes on Russian oil refineries for a second consecutive day, resulting in a fire at Rosneft’s largest refinery. These attacks represent one of the most significant disruptions to Russia’s energy sector in recent months.
The Energy Information Administration (EIA) reported unexpected declines in U.S. crude oil inventories last week, driven by increased refinery activity and surging demand, particularly for gasoline. Meanwhile, anticipation surrounded the decision of China’s central bank regarding its key policy rate, with expectations of unchanged rates to support economic growth and oil demand.
However, concerns over potential economic slowdowns loomed, as evidenced by signs of decelerating activity in the United States. Despite a larger-than-expected increase in producer prices last month, the Federal Reserve is unlikely to consider interest rate cuts before June, dampening immediate market expectations.
While profit-taking activities nudged oil prices lower on Friday, underlying market dynamics remain supportive, with geopolitical tensions, supply disruptions, and optimistic demand outlooks continuing to influence oil market sentiment. As oil markets navigate these intricate dynamics, investors remain attentive to evolving developments and their potential impact on price movements in the days ahead.