Oil prices rose on Friday, heading for gains for a fourth straight week, as the latest U.S. sanctions on Russian energy trade weighed on supply, pushing spot and freight rates higher.
Brent crude futures were trading up 55 cents, or 0.7%, at $81.84 a barrel and up 2.6% so far this week.
U.S. West Texas Intermediate crude futures were up 72 cents, or 0.9%, at $79.4 a barrel, after rising 3.6% for the week.
Last Friday, the Biden administration announced broader sanctions targeting Russian oil producers and tankers, followed by more measures against Russia’s military-industrial base and sanctions evasion efforts.
Investors are also anxiously awaiting to see if further supply disruptions emerge after Donald Trump returns to the White House on Monday.
Expectations of improved demand provided some support to the oil market. Data showed falling inflation in the United States, the world’s largest economy, boosting hopes of a rate cut.
Federal Reserve Governor Christopher Waller said on Thursday that inflation is likely to continue to decline and may allow the U.S. central bank to cut interest rates sooner and faster than expected. White House on Monday
Meanwhile, data on Friday showed that China’s economy matches the government’s ambitions of 5% growth last year, although many Chinese feel their living standards have deteriorated.
Government data on Friday also showed that China’s refinery output in 2024 fell for the first time in more than two decades except for pandemic-hit 2022, as factories scaled back production in response to stagnant fuel demand and lower margins.
Oil prices stabilize thanks to OPEC+ cuts
Benchmark Brent crude prices averaged $81 per barrel in 2024, in line with the $82 per barrel for this year we projected in our short-term energy forecast for January 2024 and more in-depth analysis. In our short-term energy outlook for January 2024, we expected markets to be relatively balanced in 2024, with little change from the 2023 average Brent price of $82 per barrel. On an annualized basis, our forecast for balanced markets was relatively accurate, with global inventories showing a slight decline of 0.18 million barrels per day in 2024.
Monthly crude oil prices in 2024 remained between $70 per barrel and $90 per barrel. Sluggish demand and relatively high supplies outside OPEC+ countries have contributed to the relatively narrow trade range for crude oil despite geopolitical tensions in the Middle East and shipping disruptions in the Red Sea. Several extensions of OPEC+ production cuts have also helped prevent prices from falling below this range.
OPEC+ production cuts helped lift the price of Brent crude in the first four months of 2024. In April 2024, Brent crude prices headed higher than we expected in our forecast for January 2024, and the spot price of Brent crude rose from a monthly average of $78 per barrel in December 2023 to $89 per barrel in April 2024. Spot price of Brent crude peaked in 2024 at $93 per barrel on April 12, 2024, amid fears that tensions between Iran and Israel could escalate into a wider conflict and disrupt global oil supplies.
OPEC+ has announced delays in production increases several times in 2024. However, production growth from non-OPEC+ countries continued to rise, offsetting OPEC+ production cuts.
Weak global growth pressures Brent crude prices
Weak global economic growth has put pressure on the price of Brent. Slowing economic activity and lower fuel demand in China have also limited the momentum of rising prices. In addition to slowing economic growth, longer-term trends in China’s transport sector have also reduced liquid fuel consumption compared to our January 2024 forecast. Replacing LNG for freight transport by trucking and expanding electric vehicle ownership in China have limited the growth of transportation fuel consumption, a trend we identified last January as a source of weak demand for liquid fuels in China.
As a result of offsetting production and weak demand, Brent crude continued its downward trend in the second half of 2024, averaging $75 per barrel during the fourth quarter, about $6 per barrel below our January 2024 forecast of $81 per barrel.
The cost of filling your car with gasoline or diesel is rising again amid a global rise in oil prices. The latest AA poll found that the price of gasoline rose by about 2 cents per liter this month, reaching an average of 1.76 cents per liter.
The latest data from the Central Bureau of Statistics reveals that the national average price of unleaded gasoline was €1.75 last month, while the average price per liter of diesel was €1.71.
This comes amid the fourth consecutive week of oil price increases in global markets, as the latest US sanctions on Russian energy trade raised expectations of oil supply disruptions.
Last Friday, the Biden administration unveiled broader sanctions targeting Russian oil producers and oil tankers. Markets are also assessing the potential consequences of Donald Trump’s return to the White House next Monday. Trump’s nominee for Treasury secretary has said he is ready to impose tougher sanctions on Russian oil.
