Oil prices rose on Wednesday as investors awaited the outcome of the U.S. Federal Reserve’s June meeting after bullish oil demand growth forecasts from the International Energy Agency (IEA) and OPEC.
Brent crude futures were up 76 cents, or 1%, at $75.05 a barrel while U.S. West Texas Intermediate (WTI) crude was up 63 cents, or 0.9%, at $70.05.
Both benchmarks climbed more than 3% the previous day on hopes of rising fuel demand after China’s central bank lowered a short-term lending rate.
Market participants expect the U.S. central bank’s Federal Open Market Committee to pause interest rate hikes because of uncertainty over the economic outlook and the lagged effects of 10 rate increases since March 2022.
Higher interest rates strengthen the dollar, making commodities denominated in the U.S. currency more expensive for holders of other currencies. A pause in the Fed’s rate increases would spur economic growth and oil demand, supporting prices.
The IEA, meanwhile, increased its oil demand growth forecast for this year by 200,000 barrels per day (bpd) to 2.4 million bpd, lifting the projected total to 102.3 million bpd.
However, the agency expects economic headwinds to reduce growth to 860,000 bpd next year and increasing use of electric vehicles to help to reduce that to 400,000 bpd in 2028 for overall demand of 105.7 million bpd.
The IEA’s 2023 oil demand growth figure is slightly above that of the Organization of the Petroleum Exporting Countries (OPEC).
On the supply side, U.S. crude oil stocks rose by about 1 million barrels in the week ended June 9, according to market sources citing American Petroleum Institute figures, contrary to an average estimate of a 500,000 barrel decline from analysts polled by Reuters.