Oil prices fell slightly early Friday as concerns over a supply glut and demand uncertainty, fueled by a stronger dollar, offset signs of robust fuel demand in the United States. Brent crude futures declined by 0.41% to $72.26 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped by 0.36% to $68.45. For the week, Brent and WTI are set to close down by 2.2% and 2.7%, respectively.
U.S. crude inventories increased by 2.1 million barrels last week, according to the Energy Information Administration (EIA)—a rise significantly higher than the anticipated 750,000-barrel increase. However, gasoline inventories saw a steep decline of 4.4 million barrels, falling to their lowest level since November 2022 and far surpassing analysts’ expectations for a 600,000-barrel rise. Distillate stocks, which include diesel and heating oil, also posted an unexpected drop of 1.4 million barrels.
Daniel Hynes, an analyst at ANZ, noted that the significant draw in fuel stocks pointed to strong U.S. demand, providing a temporary boost to oil prices. “However, prices came under pressure after the market was reminded of the bleak outlook for demand,” Hynes said.
The International Energy Agency (IEA) expects global oil supply to outpace demand by 2025, even if OPEC+ production cuts remain in place, as increased output from the U.S. and other non-OPEC countries counterbalances sluggish demand growth. The IEA adjusted its demand growth forecast for 2024 upward by 60,000 barrels per day (bpd) to 920,000 bpd, but kept its 2025 forecast largely unchanged at 990,000 bpd.
Meanwhile, OPEC recently revised down its global oil demand growth outlook for this year and 2025, citing weaker demand in key markets, including China and India. This marks the group’s fourth consecutive downward adjustment for its 2024 demand forecast.
Adding pressure to oil prices, the U.S. dollar surged to a one-year high on Thursday, marking its fifth consecutive daily gain. A stronger dollar, driven by higher yields and Donald Trump’s re-election victory, makes oil more expensive for holders of other currencies, potentially dampening global demand.
As oil markets weigh supply dynamics against demand and macroeconomic factors, the outlook remains mixed. Concerns over weak demand growth and a stronger dollar could limit price gains in the near term, despite signals of strong demand in the U.S.