Oil prices boosted by supply concerns

Oil prices edged higher on Thursday, with WTI price rising above the $81.0 per barrel level. If WTI price declines, it may encounter support near $76.0 per barrel, while resistance may be found near $84.0 per barrel.

Supply concerns boosted oil prices on Thursday. In its monthly report for March, the International Energy Agency predicted that oil supply will be insufficient to meet demand in 2024. The report assumed continued OPEC output cuts, estimating a small supply deficit this year.

US crude oil inventories released on Wednesday showed that US crude stockpiles shrank unexpectedly, boosting oil prices. The US Energy Information Administration reported a weekly drop-in US stockpiles by 1.5M barrels for the week to March 8th, against expectations of a 0.9M barrel raise and following a build by 1.4M barrels the week before.

OPEC+ announced its oil demand and economic growth forecasts in its Monthly Oil Market Report on Tuesday, providing support for oil prices. The organization revised its global economic forecast slightly up in March while keeping its oil demand growth forecasts unchanged from February’s report. According to the report, global oil demand will rise by 2.2 million barrels per day in 2024 and by another 1.8 million barrels per day in 2025.

OPEC+ announced last week its decision to keep its oil output policy unchanged, maintaining the voluntary production cuts that have already been in place through the second quarter of 2024. Russia announced additional cuts of 471K barrels per day as a result of lower refinery runs due to Ukrainian drone strikes. 

Persistent tensions in the Middle East boost oil prices. Supply concerns provide support for oil prices, as the crisis in the Gaza area threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread in the Middle East, affecting oil supply and distribution. 

China’s poor economic outlook is increasing concerns about reduced oil demand, putting a lid on oil prices, however, despite increasing geopolitical risks. Weak economic growth in China raises concerns about future demand, pushing oil prices down. 

Oil prices are also kept in check by a strong US dollar and high-interest rates. The Fed kept interest rates unchanged at its latest policy meeting in January, within a target range of 5.25% to 5.50. 

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: