Oil prices bounced back on Wednesday following a period of decline, driven by short-covering after approaching a two-week low in the previous session. The rebound comes after the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global oil demand, while a strengthening U.S. dollar continues to pressure crude gains.
By 1:13 p.m. EST (1813 GMT), Brent crude futures rose by 61 cents, or 0.9%, reaching $72.50 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude saw an increase of 59 cents, or 0.9%, hitting $68.71 per barrel. These gains follow a dip on Tuesday when both benchmarks closed at their lowest levels in nearly two weeks after OPEC lowered its demand growth forecasts for 2024 and 2025. The revised outlook, OPEC’s fourth consecutive downward adjustment, is attributed to weakened demand projections in China, India, and other regions.
“The forecast is no doubt bearish and the market is still digesting it,” noted Bob Yawger, Mizuho’s Director of Energy Futures. Nonetheless, some speculative investors entered the market to mitigate recent losses, contributing to the price rebound.
Adding to market dynamics, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman emphasized the importance of continued “close coordination” among OPEC+ members during a phone discussion on Wednesday, as confirmed by the Kremlin.
Supply concerns also loom, with Barclays warning of potential disruptions from geopolitical tensions involving Iran or the escalating Israel-Iran conflict. Additionally, the expected appointment of Senator Marco Rubio as U.S. Secretary of State could influence oil prices. Rubio’s hawkish stance on Iran may bring renewed sanctions, potentially cutting 1.3 million barrels per day from global supply, according to Ashley Kelty of Panmure Liberum.
Iran has responded to potential U.S. sanctions by confirming its readiness to maintain production and exports, Shana, the country’s oil ministry news outlet, reported.
The dollar’s recent strength, hitting a seven-month high against major currencies, also plays a role in limiting oil price gains. A stronger dollar makes dollar-denominated oil more expensive for buyers using other currencies, which can dampen demand. This appreciation comes as U.S. inflation for October aligned with expectations, signaling the Federal Reserve’s intent to continue rate cuts.
Market participants are now awaiting inventory data from the American Petroleum Institute (API) and the U.S. government. API’s report, expected to show a 100,000-barrel rise in crude stocks, and the delayed government report are scheduled for Thursday, following Monday’s Veterans Day holiday.
