Oil Prices Rise on Tightening Supply and Growing Demand Expectations

Forex - Oil prices rose due to a tightening supply from Russia and OPEC members, along with data indicating that economic activity in the United States is expanding, leading to increased oil demand.

At 0727 GMT, Brent crude oil futures on ICE rose by 33 cents or 0.43%, reaching $77.38 per barrel. West Texas Intermediate crude increased by 452 cents or 0.61% to $74.71.

According to Bloomberg, oil production in Russia fell below the country’s target in December, averaging 8.971 million barrels per day.

On the economic front, the Job Openings and Labor Turnover Survey indicated that job postings in the United States increased in November, with layoffs remaining low, suggesting that workers are reluctant to leave their jobs. Oil prices are rising alongside economic growth.

Capital Economics noted in a client report, “The November JOLTS data, when matched with recent employment reports, shows that the labor market has returned to pre-pandemic norms.” Elsewhere in the U.S., market sources referenced American Petroleum Institute numbers, indicating that crude oil inventories fell last week while fuel stocks increased. Analysts expect oil prices to average lower this year, particularly from 2024 onward, partly due to production increases from non-OPEC countries.

BMI, a Fitch Group subsidiary, maintained its forecast in a client note that Brent crude will average $80 per barrel in 2024 and $76 per barrel in 2025. The downward outlook is driven by our fundamental data forecast indicating that supply growth will outpace demand growth by 485,000 barrels per day this year, signaling a surplus.