Oil Futures Up on Geopolitics, Pare Gains on Demand Worry

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange jumped higher to kick off the last trading day of the week, shaped by the push-and-pull of U.S. macroeconomic indicators on the one side and escalating rhetoric between Israel and Iran on the other.

Wednesday's consumer price index showing inflation in the United States remaining stickier than expected in March acted as a deathblow to expectations the Federal Reserve might kick off the rate-cutting cycle in June. The resulting support for the U.S. dollar and prospects of a struggling manufacturing sector exerted downward pressure on oil prices.

At the same time, tensions in the Middle East have been ramping up after Iran vowed revenge for an Israeli strike on the Iranian consulate in Damascus which killed high-ranking Iranian officials. U.S. and Israeli intelligence services now expect an attack on an Israeli diplomatic mission or Israeli soil to be imminent. Fears of an armed conflict with the 3.2 million bpd crude oil producing country which could destabilize the entire region acted as a counterweight to monetary policy concerns this week.

Friday morning, the International Energy Agency in its latest Oil Market Report once again lowered its demand growth estimates. The Paris-based energy watchdog expects global oil demand to expand by 1.2 million barrels per day (bpd) in 2024 and 1.1 million bpd in 2025, citing slower growth and sluggish manufacturing activity in Organization for Economic Cooperation and Development countries as the main reason for the 130,000-bpd downward revision to this year's estimate. This came after the Energy Information Administration on Tuesday also trimmed growth expectations for this year in the latest Short-term Energy Outlook, from 1.43 million bpd to 950,000 bpd following a large upward revision to 2023 estimates. OPEC, in contrast, left demand growth expectations unchanged in its latest Monthly Oil Market Report released Thursday, calling for 2.25 million bpd of global oil demand growth in 2024 and 1.8 million bpd in 2025.

Near 7:30 a.m. EDT, West Texas Intermediate futures for May delivery were up $1.12 to trade near $86.14 barrel (bbl), and Brent for June delivery gained $1.02 to $90.76 bbl. RBOB for May delivery was up $0.0387 to $2.8128 gallon, while ULSD for May delivery traded near $2.7056 gallon, up $0.0458.

Brian L. Milne can be reached at brian.milne@dtn.com.

Brian Milne