Brent close to $85/bbl on demand growth expectations

The front-month ICE Brent contract gained $1.97/bbl on the day, to trade at $84.67/bbl at 09.00 GMT. 

PHOTO: Crude oil pump jacks in colour. Getty Images

Upward pressure:

Brent futures saw a significant rise on the back of bullish forecasts for global oil demand from both OPEC and the US Energy Information Administration (EIA).

OPEC maintained its global oil demand growth projection at 2.2 million b/d for this year, with an expected increase of 1.8 million b/d in 2025, reaching 106.2 million b/d.

Concurrently, the EIA projected world oil demand to grow by 1.4 million b/d in both 2024 and 2025.

The surge in oil prices can be attributed to “optimistic short-term outlooks” from industry experts, indicating a strong rebound in oil consumption during the second quarter, according to SPI Asset Management’s managing partner Stephen Innes.

Additionally, a decline in US crude oil inventories contributed to the price rally. US crude stocks dropped by 1.54 million bbls to 447 million bbls on 8 March, marking the first decrease in seven weeks, according to the EIA.

Concerns over supply disruptions from Russian energy facilities also supported Brent's price, fuelled by Ukrainian airstrikes that targeted Russian oil refineries, including Rosneft's refinery in Ryazan. These airstrikes have triggered operational suspensions in multiple locations.

Downward Pressure:

Despite the voluntary production cuts by several key members of the OPEC+ alliance, OPEC's oil production climbed in February, surpassing January levels by over 203,000 b/d, driven by increased output in Libya, Nigeria and Iraq, as indicated in its latest oil market report. This uptick has exerted downward pressure on Brent futures.

Libya saw a production increase of 144,000 b/d in February. Additionally, Nigeria exceeded its production limit by 47,000 b/d compared to January, while Iraq surpassed its pledged production of 4 million b/d by an additional 200,000 b/d.

Analysts at ANZ Bank noted that supply-side developments were not supportive of prices, citing weaker compliance with OPEC+ production targets for February. They specifically highlighted Iraq's non-compliance for the second consecutive month.

By Tuhin Roy

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