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Oil prices declined in early trading on Thursday, erasing much of the previous session’s gains due to a stronger dollar and ongoing worries about higher global oil output against a backdrop of slow demand growth forecasts. Brent crude futures fell by 45 cents, or 0.6%, to $71.83 a barrel at 0726 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped by 48 cents, or 0.7%, to $67.95.
A surge in the U.S. dollar, which reached a one-year high, added downward pressure on oil prices. The dollar’s strength followed data showing that U.S. inflation rose in October, aligning with expectations, sparking concerns about reduced demand in the world’s largest oil consumer.
Analysts have pointed to various factors dragging down oil markets. The rise in U.S. 10-year Treasury yields, coupled with a surge in the 10-year breakeven inflation rate to 2.35%, has amplified concerns over demand, according to OANDA senior market analyst Kelvin Wong.
On the supply front, the U.S. Energy Information Administration (EIA) revised its projections, raising the estimate for U.S. oil output to an average of 13.23 million barrels per day (bpd) this year. This represents a 300,000 bpd increase from last year’s record of 12.93 million bpd and a slight uptick from an earlier forecast of 13.22 million bpd. The EIA also adjusted its global oil output forecasts, projecting 102.6 million bpd for 2024 and 104.7 million bpd for 2025, slightly higher than previous estimates.
The EIA’s outlook on demand remains subdued compared to OPEC, forecasting a global demand increase of about 1 million bpd in 2024, up from an earlier estimate of 900,000 bpd. The International Energy Agency (IEA) is expected to release its oil market report later, providing further insight into demand dynamics.
Overall, the market remains volatile and bearish, with concerns over a strong dollar, rising U.S. yields, and cautious outlooks from major forecasting agencies keeping oil prices under pressure.
