Oil prices rise more than 1%, shaking off weak 2024 global demand forecast

Crude oil futures rose Thursday, shaking off earlier losses on the back of a weak global demand forecast for 2024.

The West Texas Intermediate contract for March gained $1.61, or 2.10%, to $78.25 a barrel, while the Brent contract for April traded at $83.05 a barrel, up $1.45, or 1.78%.

Oil prices were finding support from a weakening dollar after January U.S. retail sales fell more than expected, said Phil Flynn, analyst with the Price Futures Group.

Futures declined about about 1% earlier in the trading session after the Paris-based International Energy Agency forecast demand would grow by 1.2 million barrels per day this year, down nearly 50% from growth of 2.3 million bpd in 2023.

Supply, meanwhile, is expected to exceed demand and grow by 1.7 million bpd this year driven primarily by higher production in the U.S., Brazil, Canada and Guyana, according to the IEA.

“The expansive post-pandemic growth phase in global oil demand has largely run its course,” the IEA wrote in its February oil market report Thursday.

Tamas Varga, analyst with oil broker PVM, said the decline earlier in the session was a “knee-jerk” reaction to the IEA report.

“Although this year’s demand growth will be much slower than that of 2023, global oil inventories should still decline throughout the current year if OPEC keeps output low, as expected,” Varga told CNBC.

OPEC is forecasting a much tighter oil market this year, with demand growing by 2.2 million bpd, outpacing production growth of 1.2 million bpd outside the cartel.

“IEA and OPEC are engaged in a battle of the experts, but the market always gives more credence to OPEC since this is the group that actually produces and trades oil, and therefore has better market insight,” Manish Raj, managing direct at Velandera Energy Partners, told CNBC.

Raj said the market is clawing back Wednesday’s more than 1% price drop after the U.S. Energy Department reported commercial crude inventories rose by 12 million barrels.

“A one-off inventory build yesterday had crushed oil, but traders who had oversold yesterday woke up wanting to refill the positions,” Raj said. “Nobody on Wall Street gets fired for buying oil when Middle East tensions flare high and when the broader equity markets remain robust,” he said.

In the Middle East, Israel bombed Lebanon Wednesday in retaliation for rocket attacks that killed at least one person and injured seven more in northern Israel. And talks in Cairo aimed at securing a temporary ceasefire in Gaza appear to have stalled.