Crude oil edges higher after IEA forecast record demand this year

By Peter Nurse

Investing.com -- Oil prices edged higher Friday, on course to record a fourth consecutive weekly gain, after the International Energy Agency forecast record global demand this year.

By 08:55 ET (12:55 GMT), U.S. crude futures traded 0.1% higher at $82.27 a barrel, while the Brent contract rose 0.1% to $86.14 a barrel.

Brent is on course to post a 1.3% weekly gain, while WTI was up 2%.

The Paris-based intergovernmental body published its monthly oil market report earlier Friday, and forecast that world oil demand will grow by 2 million barrels per day in 2023 to a record 101.9 million barrels per day, driven mostly by stronger Chinese consumption after the lifting of COVID restrictions.

Data released earlier this week showed that China’s crude oil imports surged to 12.4 million barrels a day in March, up from 10.7 million barrels in February and the largest volume seen since June 2020.

The IEA expects a tight supply situation as the year progresses, expecting global oil supply to fall by 400,000 barrels a day by the end of the year, with an expected production increase of 1 million barrels from outside of OPEC+ being more than canceled out by the surprise output cut by the cartel earlier this month.

OPEC cited downside risks to summer oil demand as the main reason for its cut, but the IEA was critical, saying it could hurt consumers and global economic recovery.

The crude market has also been boosted by weakness in the U.S. dollar, falling to a one-year low, as economic data has pointed to cooling inflation and deteriorating economic activity, typified by the slump in retail sales in March, data showed Friday.

This prompted Fed policymakers to mention the probability of a “mild recession” later this year in the minutes of their last meeting, likely resulting in the central bank ending its rate-hiking cycle next month.

A weaker dollar makes commodities denominated in the greenback, like oil, cheaper for investors holding other currencies, boosting demand.