Oil Prices Decline Amid Production Growth Expectations

By Katya Golubkova

TOKYO (Reuters) – Oil prices dropped slightly early on Thursday due to expectations of higher global production and forecasts indicating weak demand growth. A firmer dollar also contributed to limiting price increases.

Brent crude futures decreased by 6 cents, or 0.08%, to $72.22 per barrel by 0133 GMT. U.S. West Texas Intermediate crude (WTI) futures fell 13 cents, or 0.19%, to $68.30.

The U.S. Energy Information Administration (EIA) has slightly raised its U.S. oil output expectation to an average of 13.23 million barrels per day (bpd) for this year, an increase of 300,000 bpd compared to last year's record of 12.93 million bpd, and an adjustment up from 13.22 million bpd from an earlier forecast.

The EIA also raised its global oil output forecast for 2024 to 102.6 million bpd, up from a previous forecast of 102.5 million bpd. For the following year, it anticipates world output of 104.7 million bpd, an increase from 104.5 million bpd previously.

This comes in light of the Organization of the Petroleum Exporting Countries (OPEC) cutting its global oil demand growth forecast to 1.82 million bpd for 2024, reduced from 1.93 million bpd last month, largely due to weak demand in China, India, and other regions. This downgrade has influenced oil prices to their lowest levels in nearly two weeks.

The EIA predicts oil demand growth of about 1 million bpd in 2024, which is an increase from its prior estimate of about 900,000 bpd, still lower than OPEC's forecast.

Market participants are now awaiting the International Energy Agency's oil market report due later in the day and the EIA's U.S. crude oil and product stockpiles data for additional trading cues.

"A weak outlook for demand in China continues to weigh on sentiment. The stronger USD is creating strong headwinds for commodities," ANZ Research noted in a statement.

On Wednesday, the U.S. dollar rose to near a seven-month high against major currencies after data indicating U.S. inflation for October matched expectations, suggesting the Federal Reserve will continue its rate cuts.

A firmer dollar renders commodities priced in the greenback more expensive for buyers using other currencies.