The price of crude oil (WTI) is holding steady after registering gains over the past two days, currently standing at $74.30 per barrel in the early hours of Thursday.
This comes after the American Petroleum Institute (API) reported an improvement in weekly crude oil inventories, showing a 0.674-million-barrel increase compared to the previous decline of 2.5 million barrels.
However, this figure was significantly lower than the expected reading of 2.133 million barrels for the week ending on February 2, providing positive support for crude oil prices.
I believe the increase in crude oil prices was due to the U.S. Energy Information Administration revising its expectations for domestic oil production in 2024. The forecast is now at 170,000 barrels per day, which is lower than the previous estimate of 290,000 barrels per day.
According to the Short-Term Energy Outlook (STEO), crude oil production is expected to rise to 13.21 million barrels per day in the current year. Additionally, total oil consumption in the United States is projected to reach 20.4 million barrels per day in 2024 and 20.5 million barrels per day in 2025.
From my perspective, the possibility of a ceasefire in the Gaza conflict has dampened the upward momentum of crude oil prices. However, the statements from the occupying forces rejecting the latest proposal from Gaza for a ceasefire indicate a clear intention to continue the conflict in the Middle East.
Investors are also monitoring Houthi attacks on shipping vessels in the Red Sea, disrupting traffic through the Suez Canal, the fastest maritime route between Asia and Europe, carrying approximately 12% of global trade. This cautious market movement is expected in the short term.
On the other hand, Boston Federal Reserve President Susan Collins stated that if the economy meets its expectations, the central bank is likely to be able to lower interest rates later this year, providing positive support for crude oil futures.
I believe there is confusion in the markets due to conflicting signals from the Federal Reserve, causing markets to now await monetary easing for a prolonged period, heightening risk in the market.
Especially as the International Energy Agency expects India to be the largest driver of global oil demand growth between 2023 and 2030, narrowly surpassing China as the largest oil importer. This comes at a time when major economies like China, traditionally a source of confidence in global oil demand forecasts, are weakening.