Oil Prices Edge Up Amid Supply Tightness

By Colleen Howe

BEIJING (Reuters) – Oil prices increased slightly on Wednesday due to signs of near-term supply tightness, although they remained near two-week lows. This came a day after OPEC revised its forecast for global oil demand growth for 2024 and 2025.

Brent futures rose by 13 cents (0.18%) to $72.02 a barrel by 0205 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 13 cents (0.19%) to $68.25.

ANZ analysts noted, "Crude oil prices edged higher as tightness in the physical market offset bearish sentiment on demand. Buyers in the physical market have been particularly active, with any available cargoes being snapped up quickly."

However, projections of falling demand and weakness from major consumer China continued to negatively impact market sentiment. In OPEC's monthly report released Tuesday, the organization stated that world oil demand is expected to rise by 1.82 million barrels per day (bpd) in 2024, a decrease from last month’s forecast of 1.93 million bpd, primarily due to weakened demand in China, the world's largest oil importer.

Following OPEC's news, oil prices settled up 0.1% on Tuesday after experiencing a decline of about 5% over the previous two sessions. OPEC also lowered its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd.

The International Energy Agency (IEA), which typically has a more conservative outlook, is set to release its updated forecast on Thursday.

Analysts from Barclays commented, "The re-election of former President Trump is unlikely to materially affect oil market fundamentals over the near term." They also expressed skepticism about the effectiveness of increased drilling in reducing oil prices, noting that the stock of approved permits increased during the Biden administration.

Nonetheless, markets could still feel the effects of a supply disruption from Iran or escalating tensions between Iran and Israel. Marco Rubio, expected to be Trump's Secretary of State, is known for his hardline stance on Iran, China, and Cuba. Tighter sanctions enforcement on Iran could disrupt global oil supply, while a tougher approach to China might weaken demand in its largest oil market.

Additionally, two U.S. central bankers suggested Tuesday that interest rates are acting as a brake on inflation, which remains above the 2% target, implying that the Federal Reserve may consider further interest rate cuts.

The Fed recently cut its policy rate by a quarter percentage point to the range of 4.50%-4.75%. Lower interest rates often stimulate economic activity and energy demand.

U.S. weekly inventory reports have been postponed by a day in light of Monday’s Veterans Day holiday. The American Petroleum Institute's industry data is expected to be released at 4:30 p.m. EST (2130 GMT) on Wednesday. Analysts surveyed by Reuters predict a rise of approximately 100,000 barrels in crude inventories for the week ending Nov. 8.