Brent up on OPEC’s optimistic demand growth projections

The front-month ICE Brent contract gained $0.93/bbl on the day, to trade at $78/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained some following OPEC's projection of robust oil demand growth in 2024 and 2025.

OPEC's latest oil market report forecasts a 1.85 million b/d increase in global oil demand by 2025, reaching 106.2 million b/d. The coalition kept this year's oil demand forecast at 2.2 million b/d, consistent with the previous month's projection.

Concerns about potential oil supply disruptions resurfaced after the US Navy launched another round of airstrikes at Houthi bases in Yemen, in response to their attacks in the Red Sea.

“It remains unclear how the Houthis will respond to these attacks,” said two analysts from ING Bank. “But clearly, escalation raises both the risk of disruptions to flows and the likelihood that more shippers will reroute around Southern Africa,” they added.

Downward pressure:

Brent futures felt some downward pressure after the American Petroleum Institute (API) reported a modest rise in US crude stocks.

Commercial US crude inventories increased by 483,000 bbls in the week ended 12 January, according to API data. This increase contrasts with analysts' expectations of a 2.4 million bbls decline.

Brent’s price gains were also capped by the strengthening US dollar, after comments from US Federal Reserve (Fed) officials dampened market expectations of interest rate cuts in the first quarter of 2024.

A stronger US dollar could make commodities such as oil costlier for non-dollar buyers and dampen demand growth.

“Comments from a Fed official and a surge in the USD [US dollar] yesterday held large parts of the commodity complex back,” ING’s analysts said.

By Aparupa Mazumder

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