Oil Prices Set for Weekly Increase Influenced by IEA Forecast and Weaker Dollar

Oil prices have witnessed an upward trend in early Asian trading on Friday, positioning themselves for their first weekly increase in two months. This rise is attributed to a positive forecast for oil demand in the coming year by the International Energy Agency (IEA) and the impact of a weaker U.S. dollar.

As of 0006 GMT, Brent futures had experienced a rise of 9 cents, reaching $76.70 a barrel. Concurrently, U.S. West Texas Intermediate (WTI) crude saw an increase of 10 cents, reaching $71.68. Both benchmarks are poised for a modest weekly gain, primarily driven by an announcement from the U.S. Federal Reserve earlier in the week, suggesting potential reductions in borrowing costs next year.

The U.S. dollar dropped to a four-month low on Thursday following indications from the Federal Reserve that the current cycle of interest rate hikes might be concluding, with lower borrowing costs anticipated in 2024. A weaker dollar typically makes oil, which is priced in U.S. dollars, more affordable for buyers using other currencies.

In contrast, the European Central Bank has signaled its intention to maintain high borrowing costs, countering expectations of imminent rate cuts, despite lower inflation projections.

The IEA’s monthly report has raised its projection for world oil consumption in 2024 by 1.1 million barrels per day (bpd), an increase of 130,000 bpd from its previous forecast. This adjustment is based on improved U.S. demand prospects and lower oil prices. However, the IEA’s estimate for 2024 is significantly lower than the 2.25 million bpd demand growth forecast by the Organization of the Petroleum Exporting Countries (OPEC).

Recent economic data from China, the world’s second-largest oil consumer, has exerted downward pressure on oil prices. Key indicators such as Chinese retail sales, industrial production, business investment, unemployment, and housing prices for November are set to be released later on Friday, which could further impact oil market dynamics.

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