Oil prices dip, but set to end week over 3% higher

Oil prices edged lower on Friday but were on track to gain over 3% for the week, boosted by the International Energy Agency raising its 2024 oil demand forecast and an unexpected decline in U.S. stockpiles.

Brent crude oil futures were down 47 cents or 0.6% to $84.95 a barrel at 1434 GMT, a day after topping $85 a barrel for the first time since November. U.S. West Texas Intermediate (WTI) crude was down 49 cents or 0.6% to $80.77.

“Crude futures were staging a mild retreat from fresh four-month peaks … likely entering a consolidation phase to await further direction,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Prices had remained range-bound for much of the last month roughly between $80 to $84 a barrel before the IEA on Thursday raised its view on 2024 oil demand for a fourth time since November as persistent Iran-aligned Houthi forces continue to disrupt Red Sea shipping.

World oil demand is expected to rise by 1.3 million bpd in 2024, the IEA estimated in its latest report, revising its previous forecast up by 110,000 bpd. It also forecast a slight supply deficit this year – should OPEC+ members sustain their output cuts – having previously forecast a surplus.

Also supporting prices were Ukrainian strikes on Russian oil refineries, which caused a fire at Rosneft’s biggest refinery in one of the most serious attacks against Russia’s energy sector in recent months. U.S. crude oil stockpiles also fell unexpectedly last week as refineries ramped up processing while gasoline inventories slumped as demand rose, the Energy Information Administration said on Wednesday. Economic policy in China and the United States is also set to influence demand for crude.

On Friday, China’s central bank left a key policy rate unchanged as authorities continued to prioritise currency stability amid uncertainty over the timing of expected U.S. Federal Reserve interest rate cuts.

Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.

In the United States, some signs of slowing economic activity were seen as unlikely to spur the Federal Reserve to start cutting interest rates before June as other data on Thursday showed a larger-than-expected increase in producer prices last month.

(Additional reporting by Natalie Grover in London, Arathy Somasekhar in Houston and Sudarshan Varadhan in Singapore; editing by Michael Perry, Jason Neely and Emelia Sithole-Matarise)