Oil prices were up on Friday and secured a fourth straight week of gains after the West’s energy watchdog said global demand will hit a record high this year on the back of a recovery in Chinese consumption.
The International Energy Agency (IEA) also warned that deep output cuts announced by the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia – a group known as OPEC+ – could exacerbate an oil supply deficit and hurt consumers.
Brent crude futures settled at $86.31 a barrel, rising 22 cents, or 0.3%. West Texas Intermediate crude futures (WTI) settled at $82.52 a barrel, gaining 36 cents, or 0.4%.
Both contracts posted a fourth consecutive week of gains amid easing concerns over a banking crisis that struck last month and the surprise decision last week by OPEC+ to further cut output.
Brent is set to post a 1.5% weekly gain, while WTI was up 2.4% on the week. Four weeks of increases would be the longest such streak since June 2022.
In its monthly report on Friday, the IEA said world oil demand is set to grow by 2 million barrels per day (bpd) in 2023 to a record 101.9 million bpd, driven mostly by stronger consumption in China after the lifting of COVID restrictions there.
Jet fuel demand accounts for 57% of the 2023 gains, it said.
But OPEC on Thursday flagged downside risks to summer oil demand as part of the backdrop for its decision to cut output by a further 1.16 million bpd.
The IEA said the OPEC+ decision could hurt consumers and global economic recovery.
“Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly,” it said in its monthly oil report. “This augurs badly for the economic recovery and growth.”
The IEA said it expected global oil supply to fall by 400,000 bpd by the end of the year, citing an expected production increase of 1 million bpd from outside of OPEC+ beginning in March versus a 1.4 million bpd decline from the producer bloc.
“The narrative has taken hold again of rising demand and relative supply tightness, and that’s what’s keeping oil buoyed,” said John Kilduff, partner at Again Capital LLC.
Also helping to boost prices was the U.S. oil and gas rig count, an indicator of future supply, which fell for the third week in a row, according to Baker Hughes data. U.S. oil rigs fell by two to 588 this week, their lowest since June 2022, while gas rigs fell by one to 157. [RIG/U]
The U.S. dollar index was trading at roughly a one-year low, after U.S. consumer and producer price data releases raised expectations that the Fed was approaching the end of its rate-hiking cycle.
Still, the greenback edged up on Friday, making dollar-denominated oil more expensive for investors holding other currencies and limiting oil price growth.