Brent gains on the back of positive IEA demand growth outlook

Front-month ICE Brent has gained by $1.24/bbl on the day, to $85.54/bbl at 09.00 GMT.

PHOTO: The Federal Reserve headquarters in Washington DC. Founded in 1913, the Fed is the central bank of the US. Getty Images

Upward pressure:

Global oil demand is set to rise by 2 million b/d this year, to 101.9 million b/d, according to the latest International Energy Agency (IEA) Oil Market Report. The growth outlook is dominated by resurgent Chinese oil demand following its exit from self-imposed Covid-19 restrictions.

Strong economic data from the US indicates increased demand. On Thursday, the US Census Bureau reported January 2023 retail and food services sales data with a 3% increase from the previous month and a 6.4% increase from last year.

New light-vehicle sales in the US increased by 4.2% on the year to 15.74 million units in January, as per the latest National Automobile Dealer Association (NADA) Market Beat.

There were also indications of improvement in business activity in the state of New York.

Downward pressure:

“Crude prices are under pressure as the dollar rallies following impressive economic data that paves the way for more Fed tightening.” says Edward Moya, senior market analyst OANDA.

Investors were concerned that rising interest rates will slow the economy and cut oil demand, according to Reuters.

Commercial US crude inventories grew by a massive 16.28 million bbls on the week, to 471.40 million bbls on 10 February -- the highest level since June 2021, according to the EIA. The stock build was greater than the 10.5 million bbl build estimated by the American Petroleum Institute (API) a day earlier.

By Nitin Sharma

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