Boost from IEA and OPEC Reports
A significant boost for the crude oil market came from the International Energy Agency (IEA), which raised its forecast for global oil consumption in its monthly report. The Agency projected a rise of 1.1 million barrels per day, an increase of 130,000 barrels a day from its previous forecast. This upward revision was driven by an improved outlook for the United States and lower oil prices.
In addition, the monthly report from the Organization of the Petroleum Exporting Countries (OPEC) was also constructive. The producing cartel estimated a tighter crude oil market in the fourth quarter of this year and 2024 due to a potential shortfall in supply if announced output cuts are maintained.
Central Bank Interest Rate Decision
The market saw a positive reaction on Wednesday following the U.S. central bank’s decision to keep interest rates unchanged at its final policy meeting of the year. The Federal Reserve signaled potential rate cuts to come in 2024. This news is particularly important for the U.S., the largest consumer of crude oil globally, as lower interest rates can boost economic growth and demand for oil by reducing consumer borrowing costs.
Oil Inventories and Weaker Dollar
Data from the Energy Information Administration shows that U.S. oil inventories fell by 4.3 million barrels in the week to December 8, exceeding the expected decrease of 650,000 barrels. This decline in inventories further supported the rise in crude oil prices.
In addition, the U.S. dollar weakened as a result of the Federal Reserve’s more dovish stance, reaching a fresh four-month low. A weaker dollar makes oil, which is denominated in the U.S. currency, more affordable for foreign buyers, thus contributing to the upward momentum in crude prices.
Supply Disruption Concerns
Recent concerns over supply disruptions in the Middle East have also played a role in boosting crude oil prices. An attack on a tanker in the Red Sea by Yemen-backed Houthi forces has raised worries about the spillover of a larger conflict in the region. While these incidents raise potential risks to oil supplies, the impact on Middle Eastern oil supplies remains limited thus far.