Oil soars as IEA raises demand growth forecast for 2022

Oil prices stood above $2 on Thursday after the International Energy Agency raised its oil demand growth forecast for this year, as soaring natural gas prices forced some consumers to turn to oil.

Brent crude futures gained $2.20, or 2.3%, to settle at $99.60 a barrel. U.S. West Texas Intermediate crude futures settled down $2.41, or 2.6%, at $94.34.

“Natural gas and electricity prices have reached new highs, prompting a switch from gas to oil in some countries,” the Paris-based agency said in its monthly oil report. It raised its demand outlook for 2022 by 380,000 barrels per day (bpd).

In contrast, the Organization of the Petroleum Exporting Countries (OPEC) cut its global oil demand growth forecast for 2022, citing the impact of Russia’s invasion of Ukraine, high inflation and efforts to contain the pandemic. [OPEC/M]

OPEC expects oil demand in 2022 to increase by 3.1 million bpd, down 260,000 bpd from previous forecasts. He still sees a higher global oil demand figure than the IEA for 2022.

Prices also rose as the U.S. dollar extended its losses against other major currencies after a report showed U.S. inflation was not as high as expected in July, prompting traders to retrace expectations of rate hikes by the Federal Reserve.

A rise in oil inventories in the United States last week and the resumption of crude flows on a pipeline supplying central Europe capped price gains.

U.S. crude oil inventories rose 5.5 million barrels in the past week, the U.S. Energy Information Administration said, more than the forecast increase of 73,000 barrels.

Gasoline product supplied rose to 9.1 million barrels per day, although the figure shows a 6% decline in demand over the past four weeks compared to a year earlier.

The premium for first-month WTI futures over six-month barrel loading was set at $4.38 a barrel, the lowest in four months, indicating an easing of tensions in fast supplies.

Major U.S. Gulf of Mexico oil producer Shell said a pipeline leak prompted it to halt production at three U.S. deepwater Gulf of Mexico rigs designed to produce up to 410 000 barrels of oil per day combined.

The resumption of flows on the southern section of the Russia-Europe Druzhba pipeline has further eased concerns over global supply. On Tuesday, Russia’s state pipeline monopoly, Transneft aid Ukraine, had suspended flows to parts of central Europe since the start of the month because Western sanctions prevented it from receiving transit fees from Moscow.

Meanwhile, physical oil prices around the world have started to decline, reflecting easing worries about supply disruptions from Russia and heightened worries about a possible global economic slowdown.

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