22 January 2014, News Wires – Brent futures rose above $107 a barrel on Wednesday as outlook reports indicated global oil demand will rise more quickly this year as economic growth in industrialised countries accelerates.
The economic growth will absorb more supply even as US shale oil output reaches record highs, the International Energy Agency (IEA) said on Tuesday. The same day, the International Monetary Fund (IMF) raised its global growth forecast for the first time in nearly two years, saying advanced nations could pick up the mantle of growth from emerging markets.
Brent crude increased 34 cents to $107.07 a barrel early on Wednesday. On Tuesday, Brent hit a nearly two-week high of $108 and ended 38 cents up.
US oil was up 45 cents to $95.42 a barrel, after earlier touching its highest in more than two weeks at $95.49.
“Improvement in global industrial production will translate to higher energy demand,” Michael McCarthy, chief strategist at CMC Markets in Sydney said. “Technical factors and better demand outlook are likely to keep oil prices supported.”
Oil demand growth has been boosted by a robust economic rebound in the United States, where the IEA has revised up its 2013 demand estimate by 180,000 barrels per day to 18.9 million bpd.
The IMF also pointed to the United States as one of the bright spots for the global economy.
These forecasts and technicals will keep Brent supported at around $105.50-$106 a barrel in the short term, and prices may bounce above those levels to about $108, McCarthy said.
The US benchmark may rise to around $96.50.
Those levels may be the staging point for further gains in Brent to about $110 and $99.50 in US oil, McCarthy said.
Beyond the improving demand outlook, geopolitical tensions in the Middle East also continue to put a floor on oil prices.
While progress in talks between the West and Iran to end a decade-old nuclear dispute has removed some of the risk, investors remain worried about the crisis in Syria spilling across the region and disrupting supplies.
Investors are awaiting the latest oil inventory data from the United States. US commercial crude inventories likely rose last week for the first time in eight weeks, by an average of 1.6 million barrels, a preliminary Reuters poll showed.
In the refined products sector, distillate stocks, including heating oil and diesel fuel, were forecast to have dropped 400,000 barrels on average. Gasoline stocks were seen to have increased by 1.6 million barrels last week.
The API will release its report later on Wednesday, delayed a day due to the Martin Luther King Jr Day holiday on Monday, while EIA data is delayed to Thursday.