Weekly Gain in Oil Prices Due to Middle-East Conflict and despite IEA’s Slow Demand Forecast; Brent Price at $83 per barrel

Oil prices settled higher in the previous session due to geopolitical tensions in the Middle East, offsetting the forecast for slowing demand by the International Energy Agency (IEA). Brent crude futures settled at $83.47 a barrel, while US West Texas Intermediate crude settled at $79.19. On the Multi Commodity Exchange (MCX), crude oil futures for March 19 expiry last settled at ₹6,484 per bbl.

The Middle East’s growing risk of a wider conflict supported crude prices. Analysts reported that the oil market’s reaction to news from the Middle East was moderate. Hezbollah fired dozens of rockets at a northern Israeli town, resulting in moderate market reaction. In Gaza, Israel’s war with Islamist group Hamas led to a siege on the largest functioning hospital, and a missile fired from Yemen struck an India-bound tanker carrying crude oil.

The IEA said that global oil demand growth was losing momentum and trimmed its 2024 growth forecast due to a slowdown in Chinese consumption. However, the Organization of the Petroleum Exporting Countries (OPEC) stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, and raised its economic growth forecasts for both years.

US producer prices increased more than expected in January, amplifying inflation worries. Despite this, a slump in retail sales prompted hopes the Fed will soon start cutting rates, which could support oil demand. OPEC expects oil use to keep rising for the next two decades.

Oil prices remain volatile due to ongoing conflicts and geopolitical tensions in the Middle East, as well as the varying forecasts from the IEA and OPEC. Despite these uncertainties, the demand for oil is expected to continue rising in the coming years.