NEW YORK: Oil prices rose more than 3% on Thursday, extending the previous session’s gains, boosted by a weaker dollar and as the International Energy Agency (IEA) lifted its oil demand forecast for next year.
Brent futures were up $2.64, or 3.6%, to $76.90 a barrel at 11:30 a.m. EST (1630 GMT). US West Texas Intermediate (WTI) crude climbed $2.53, or 3.6%, to $72.00. The market has turned around after dropping on Wednesday to a nearly six-month low.
World oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for the United States and lower oil prices. The 2024 estimate is less than half the forecast of the Organization of the Petroleum Exporting Countries (OPEC).
A drop in the dollar after the US central bank on Wednesday signaled lower borrowing costs for 2024 also boosted prices. The dollar fell to a fresh four-month low on Thursday after the US Federal Reserve’s latest economic projections indicated the interest rate hiking cycle has likely ended and lower borrowing costs are coming in 2024. “Obviously the mood for oil has changed dramatically.
One of the major catalysts for shaking volatility out of market was the Federal Reserve,” said Phil Flynn, an analyst at Price Futures Group. Lower interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil.
A weaker dollar makes oil less expensive for foreign purchasers. The European Central Bank, meanwhile, pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.
Oil investors will usher in 2024 with gnawing concerns about slowing economic growth and oversupply, while simmering tensions in the Middle East could spark price volatility. Benchmark Brent has averaged around $80 a barrel this year. A Reuters survey of 30 forecasts from economists and analysts sees Brent crude averaging $84.43 a barrel in 2024.