Crude oil price spikes to $83.25 a barrel amid global stock decline

The forecasts imply limited downside for crude oil prices in the second half of the year.

Global oil prices rose more than 1.5% after three key forecasters predicted that global oil inventories would fall in the second half of 2024, while US inflation data solidified expectations for a US Federal Reserve interest rate cut by September.

Brent crude prices rose by $1.33, or about 1.6%, to $83.25 a barrel after prices had eased more than 2% last week. 

This came after Opec and its allies said they would phase out output cuts starting from October.

The International Energy Agency, the US Energy Information Administration, and the Organisation of the Petroleum Exporting Countries have this week updated their views on the global oil demand-supply balance for 2024. 

Their reports imply limited downside for prices in the second half of the year, with all three predicting declines in global oil inventories, and the International Energy Agency seeing a larger depletion than the other two, according to Tamas Varga of oil broker PVM. 

Those views were echoed in industry data, showing US crude oil inventories fell more than expected last week. 

US consumer price data reinforced expectations of a Fed rate cut by September

Higher borrowing costs tend to dampen economic growth, and could — by extension — limit oil consumption in the US and around the world. 

Although the International Energy Agency trimmed its 2024 oil demand growth forecast on Wednesday to just under 1m barrels per day, citing sluggish consumption in developed countries, the numbers suggest it agrees with Opec and the US Energy Information Administration that there will be stock draws in the second half of the year. 

The International Energy Agency also predicted oil demand growth would plateau at 105.6m barrels per day by 2029, and be well eclipsed by supply — a full 8m barrels above projected demand — by 2030. 

The International Energy Agency's view for next year, and up to the 2030s, is bleak, Mr Varga noted. 

"But if there are stock draws for the second half of this year, then why would we expect a significant fall on prices in the anticipation that there will be a glut by 2030?" he said.

The US Energy Information Administration this week raised its 2024 world oil demand growth forecast to 1.1m barrels a day, while Opec stuck with its 2024 forecast of 2.25m barrels.

Meanwhile, European wholesale gas prices also rose sharply, up by almost 3.5% to trade at €35.45 per MWh in the latest trading session.

Recent gas price gains have taken the shine off sharp falls in wholesale supplies that had delivered falls in household and business energy bills. 

As recently as February, European wholesale gas was trading at a much lower prices of around €23.50 per MWh. 

• Reuters with additional reporting by the Irish Examiner.