Oil little changed as IEA surplus forecast offsets rate cut optimism

Oil prices were little changed on Thursday as a forecast for ample supply in the oil market offset optimism stemming from rising expectations of a US interest rate cut. 

Brent crude futures were down 8 cents at $73.44 a barrel at 1303 GMT. US West Texas Intermediate crude futures were up 3 cents to $70.32. Both benchmarks rose by more than $1 on Wednesday. 

The International Energy Agency said it expected the oil market to be comfortably supplied next year, even as it revised its demand outlook for next year up slightly. OPEC cut its demand growth forecast for 2024 for the fifth straight month on Wednesday and by the largest amount yet. 

"They still call for a massively oversupplied market, but this has declined slightly with their demand revision," said Giovanni Staunovo, commodity analyst at UBS. "The market is waiting for more news on fiscal measures around the world, I wouldn't expect big price moves in the near term." In the US, inflation rose slightly, in line with economists' expectations. Investors are broadly expecting another rate cut from the Federal Reserve, spurring some optimism about economic growth and energy demand. 

"The inflation report creates a lot of comfort. It could have been better, but it seems to be low enough for the Fed to reduce rates at the next meeting," said Bjarne Schieldrop, chief commodities analyst at SEB. 

In the world's top oil consumer, the United States, gasoline and distillate inventories rose by more than expected last week, according to data from the Energy Information Administration. 

Weak demand, particularly in top importer China, and non-OPEC+ supply growth were two factors behind the move. 

However, investors anticipate a rise in Chinese demand, after Beijing unveiled plans this week to adopt an "appropriately loose" monetary policy in 2025, which could spur oil demand. 

Global oil demand rose at a slower-than-expected rate this month, but has remained resilient, analysts at JPMorgan said in a note on Thursday. 

"Growth (in oil demand) over the past week has been tempered by a slight reduction in jet fuel consumption across much of the world," the note read. 

Chinese crude imports also grew annually for the first time in seven months in November, up more than 14 per cent from a year earlier. 

The market will now watch for cues on interest rate cuts by the Fed next week. 

Oil prices rose on Wednesday after European Union ambassadors agreed to a 15th package of sanctions on Russia over its war against Ukraine. They targeted the "shadow fleet" of ships that has aided Russia in bypassing the $60 per barrel price cap imposed by the G7 on Russian seaborne crude oil in 2022. 

The Kremlin said that reports of a possible tightening of US sanctions on Russian oil suggested the administration of President Joe Biden wanted to leave a difficult legacy for US-Russia relations. 

Treasury Secretary Janet Yellen said on Wednesday that the US was continuing to look for creative ways to reduce Russia's oil revenue, adding that lower global demand for oil created an opportunity for more sanctions.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)