HomeFutures and CommoditiesOil prices remain steady due to a gloomy IEA forecast, dampening expectations...

Oil prices remain steady due to a gloomy IEA forecast, dampening expectations for a US interest rate cut.

Oil Prices Stall Over IEA Forecast and Weak U.S. Retail Sales Data

Oil Prices Stalled by IEA Forecast

Oil prices stalled on Friday due to a forecast of slowing demand by the International Energy Agency (IEA). The IEA’s report indicated that global oil demand growth was losing momentum, leading to a downward revision of its 2024 growth forecast. This contrasted sharply with the more optimistic view held by the Organization of the Petroleum Exporting Countries (OPEC).

Impact of Weak U.S. Retail Sales Data

Weak U.S. retail sales data in the previous session had initially sparked optimism that the Federal Reserve might cut interest rates sooner than expected. This optimism had caused oil prices to gain, with both Brent and U.S. West Texas Intermediate crude futures climbing over 1% on Thursday.

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Market Reaction and Outlook

However, the market sentiment has been cautious, with investors adjusting their positions ahead of a long weekend in the U.S. The expectation of U.S. rate cuts has provided support, but concerns remain about geopolitical risks in the Middle East potentially impacting crude supply chains.

Hezbollah’s firing of rockets at a northern Israeli town and the resulting Israeli raid on the biggest functioning hospital in Gaza have raised the specter of a wider Middle East conflict, which could continue to guide crude prices.

Analyst’s Perspective

Analysts, such as Vandana Hari, founder of oil markets analysis provider Vanda Insights, have emphasized the potential for increased Mideast risk premium to persist, especially going into the weekend. The looming Israeli offensive in Rafah and the potential response from Iran-backed militia in the region add to the uncertainty surrounding oil prices.

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Price Movement and Outlook

As a result, oil prices have remained flat, with WTI expected to trade in the $70-$80 range for a while. The anticipation of U.S. rate cuts and the ongoing geopolitical tensions in the Middle East are likely to continue influencing oil market dynamics in the near term.

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