Oil prices dipped on Friday but were on track to record a weekly gain amid a surprise drop in US crude stocks and an improving global oil demand outlook.
Brent, the benchmark for two thirds of the world’s oil, settled 0.09 per cent lower at $85.34 a barrel.
West Texas Intermediate, the gauge that tracks US crude, closed 0.27 per cent lower at $81.04 a barrel.
On Thursday, the International Energy Agency raised its oil demand growth forecast for this year by 110,000 barrels per day, and said it expected oil markets to be in a deficit in 2024 instead of the surplus predicted by the agency earlier.
The IEA said its forecast was based on the assumption that Opec+ supply cuts would continue into the second half of the year.
Opec+ members, including Saudi Arabia, the UAE and Kuwait, have extended voluntary supply cuts of 2.2 million bpd into the second quarter to stabilise the market. The producer alliance will next meet in Vienna on June 1.
This week, Opec stuck to its oil demand projections for 2024 and 2025, and raised its forecast for economic growth this year, citing strong activity in the US and India.
“We view that oil’s slow-but-steady advance this year still has further to run in the near term in the wake of the Opec+ decision to roll over its output cuts to June,” said Ehsan Khoman, head of commodities, ESG and emerging markets at MUFG, in a research note on Thursday.
“While oil is often given to haring around, it’s the snail's slow-and-steady pace that we are convinced will be more effective as the year further advances, than the animal spirits at the current juncture.”
Meanwhile, US crude stocks, an indicator of fuel demand, decreased by 1.5 million barrels in the week that ended on March 8, according to the US Energy Information Administration.
Analysts polled by Reuters were expecting a growth of 1.3 million barrels.
Total petroleum stocks fell by 5.7 million barrels, while distillate fuel inventories rose by 900,000 barrels, EIA data showed.
Oil prices also gained as Ukraine’s attacks on Russian refineries stoked fears of a supply disruption.
On Wednesday, Ukraine's drone strikes resulted in a fire at Rosneft's largest refinery. The incident stood out as one of the most severe attacks on Russia's energy sector in recent months.
Recently, Kyiv has intensified its strikes on Russian refineries and energy installations.
“Trend and momentum indicators support a further rise in oil prices. But oil bulls could hit a wall if we see a hawkish shift from the [US Federal Reserve] at next week’s meeting,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
The Federal Open Market Committee is set to convene on March 19 and March 20.
While it is widely believed to maintain the interest rates, markets look for hints on the potential timing for policy tightening.
Lower interest rates typically encourage economic growth, improving crude demand.
“The Fed will update its dot plot having seen a two-month jump in inflation, robust jobs data, a relatively strong gross domestic product print and healthy earnings,” Ms Ozkardeskaya said.
