Little Change for Oil After Mixed Signals From IEA

The Agency warns of a 60% reduction in demand next year: File Image/Pixabay

Following the Organization of the Petroleum Exporting Countries' (OPEC) earlier declaration that demand will remain strong in the foreseeable future, the International Energy Agency (IEA) on Tuesday raised its demand growth forecasts.

But the news had little impact on oil prices, with Brent falling just 5 cents to $82.47 a barrel and West Texas Intermediate (WTI) unchanged at $78.26/bbl.

The IEA raised its 2024 oil demand growth forecast to 930,000 barrels per day (bpd) from 880,000 bpd; it also expects world demand this year to rise by 2.4 million bpd, up from 2.3 million bpd.

By comparison, OPEC's demand forecast for 2023 was 2.46 million bpd.

However, in its latest monthly report the IEA also stated that "For now, with demand still exceeding available supplies heading into the Northern Hemisphere winter, market balances will remain vulnerable to heightened economic and geopolitical risks – and further volatility ahead."

Plus, the IEA's 2024 forecast was 1.32 million bpd lower than that of OPEC's, with the agency noting that a demand slowdown of 60 percent will occur as "the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves."

Also giving oil a boost on Tuesday was a falling U.S. dollar due to reports that the annual increase in inflation in that country was the smallest in two years.

This in turn caused traders to speculate yet again that the Federal Reserve could start cutting interest rates by May – even though a host of bankers across the U.S. have repeatedly warned that further hikes were a distinct possibility.

In other oil related news on Tuesday, the European Union was reportedly considering toughening enforcement of its price cap on oil from Russia, noting that almost none of the oil is currently being traded below the $60 cap.

Also on Tuesday, ExxonMobil announced that it had begun production from its Payara project offshore Guyana; Payara will increase Guyana's crude oil production to 620,000 bpd.

Exxon's third FPSO, Prosperity, has started up ahead of schedule and will add 220,000 bpd.