Oil prices rose on Thursday, extending the previous session’s gains, boosted by a weaker dollar and as the International Energy Agency (IEA) lifted its oil demand forecast for next year. Brent futures were up $2.49, or 3.4%, to $76.75 a barrel. U.S. West Texas Intermediate (WTI) crude climbed $2.41, or 3.50%, to $71.88. World oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for the United States and lower oil prices. The 2024 estimate is less than half the forecast of the Organisation of the Petroleum Exporting Countries (OPEC).
A weaker dollar after the U.S. central bank signalled lower borrowing costs for 2024 also boosted prices. The dollar dropped to a fresh four-month low on Thursday after the U.S. Federal Reserve’s latest economic projections indicated the interest rate hike cycle has ended and lower borrowing costs are coming in 2024. “Crude oil prices rebounded before the Fed meeting, and the event lifted them further,” said CMC Markets analyst Tina Teng in a client note.
Lower interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil. A weaker dollar makes oil less expensive for foreign purchasers. The European Central Bank, meanwhile, pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations. Oil prices were also boosted by a larger-than-expected draw from the U.S. crude inventory, Teng added. The U.S. Energy Information Administration (EIA) said energy firms withdrew a bigger-than-expected 4.3 million barrels of crude from stockpiles in the week ended Dec. 8 as imports fell.