© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian
By Laura Sanicola
(Reuters) – Oil prices rose more than $2 on Thursday after the International Energy Agency raised its oil demand growth forecast for this year as soaring prices lead some consumers to switch to oil.
futures gained $2.39, or 2.5%, to $99.79 a barrel at 1348 GMT, while US West Texas Intermediate crude futures rose $2.65, or 2.9%, to $94.58.
“Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based agency said in its monthly oil report. It raised its outlook for 2022 demand by 380,000 barrels per day (bpd).
By contrast, the Organization of the Petroleum Exporting Countries (OPEC) on Thursday cut its 2022 forecast for growth in world oil demand, citing the economic impact of Russia’s invasion of Ukraine, high inflation and efforts to contain the pandemic.
OPEC expects 2022 oil demand to rise by 3.1 million bpd, down 260,000 bpd from the previous forecast. However, it still sees a higher overall global oil demand figure than the IEA for 2022.
Prices were also boosted by a weakening US dollar, which extended its losses against other major currencies on Thursday after a report showed US inflation was not as hot as anticipated in July, prompting traders to dial back expectations for rate hikes by the Federal Reserve going forward .
A rise in US oil inventories last week and the resumption of crude flows on a pipeline supplying central Europe capped further price gains.
oil stocks rose by 5.5 million barrels in the most recent week, the US Energy Information Administration said, more than the expected increase of 73,000 barrels.
Gasoline product supplied rose in the most recent week to 9.1 million barrels per day, although that figure shows demand down 6% over the last four weeks compared with the year-ago period.
The premium for front-month WTI futures over barrels loading in six months’ time was pegged at $4.38 a barrel on Thursday, the lowest in four months, indicating easing tightness in prompt supplies.
The resumption of flows on the southern leg of the Russia-to-Europe Druzhba pipeline further calmed market worries over global supply.
Russian state oil pipeline monopoly Transneft restarted oil flows via the southern leg of the Druzhba oil pipeline. Ukraine had suspended Russian oil pipeline flows to parts of central Europe since early this month because Western sanctions prevented it from receiving transit fees from Moscow, Transneft said on Tuesday.
Meanwhile, physical oil prices around the world have begun to soften alongside futures, reflecting easing concerns over Russian-led supply disruptions and heightened worries about a possible global economic slowdown.