Oil steady with differing views from IEA, OPEC

OIL steadied after a short-lived relief rally as the market digested differing views on the supply and demand outlook, while an industry report pointed to an expansion in US stockpiles.

Global benchmark Brent edged up toward US$83 a barrel, while West Texas Intermediate was above US$78. The International Energy Agency said global oil markets won’t be as tight as expected this quarter, with production growth in the US and Brazil beating forecasts. That came after an assessment from OPEC that highlighted robust growth trends and healthy fundamentals.

The differing views from the two bodies “will likely keep oil markets on edge,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. He sees Brent averaging US$85 a barrel this quarter, falling to US$75 by the second quarter of 2024 on demand concerns, “more in line with the IEA’s view of the world, but OPEC+ supply policy will be key.”

Oil has fallen sharply since mid-October as the Israel-Hamas war risk premium evaporated and doubts set in about the demand outlook, before rising in the three days through Monday. It’s lacked direction since then, with worries over the health of the global economy balanced by indicators that still show the market is in deficit.

In the Middle East, Israeli forces entered Gaza’s Shifa hospital compound as part of a “precise and targeted operation” against Hamas, designated a terrorist organization by the US and European Union. The Biden administration is increasingly frustrated with Israel’s conduct of the war as civilian deaths rise.A soft US inflation print on Tuesday spurred bets the Federal Reserve will start cutting interest rates by mid-2024, aiding the longer-term outlook for oil consumption and sending the dollar tumbling.