Oil prices steadied on Wednesday, with Brent crude futures and U.S. West Texas Intermediate (WTI) crude futures trading slightly lower. The market was buoyed by expectations of higher demand as the U.S. dollar weakened and a report showed a drawdown in U.S. crude and gasoline inventories.
According to sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 3.104 million barrels in the week ended May 10. Gasoline inventories also declined by 1.269 million barrels, while distillates rose by 673,000 barrels. The official U.S. government inventory data is expected to show a similar drop in crude stockpiles as refineries increase runs to meet higher fuel demand ahead of the peak summer driving season.
However, the longer-term outlook remains more cautious. The International Energy Agency (IEA) trimmed its forecast for 2024 oil demand growth by 140,000 barrels per day (bpd) to 1.1 million bpd, largely due to weak demand in developed OECD nations. The IEA noted that oil demand in these countries actually contracted in the first quarter of this year.
Macquarie’s global oil and gas strategist, Vikas Dwivedi, expects prices to remain range-bound between $80-$90 through the second quarter of 2024. After that, he anticipates oil will become bearish as a result of non-OPEC supply growth, decreasing OPEC+ spare capacity, and softer-than-anticipated demand due to persistent inflation.
The market is also watching the upcoming U.S. consumer price index (CPI) data, which could provide insights into whether the Federal Reserve may cut interest rates later this year, a move that could spur the economy and boost fuel demand.
Oil prices found additional support from a softer U.S. dollar and concerns around Canadian oil supply. A large wildfire is approaching Fort McMurray, the hub for Canada’s oil sands industry, which produces 3.3 million barrels per day of crude, or two-thirds of the country’s total output.