Oil up as IEA sees 2023 demand spike; Strong dollar cuts gains

By Barani Krishnan

Investing.com — Oil markets rose for a fourth consecutive week, riding on global energy agency IEA’s upgraded demand prospects for 2023, although gains for Friday were cut by a resurgent , which is usually bearish for commodities.

New York-traded  West Texas Intermediate, or , settled up 36 cents, or 0.4%, on the day at $82.52 a barrel. For the week, the U.S. crude benchmark rose 2.3% from the March 6 settlement of $80.70.

London-traded , the global benchmark for crude, settled up 22 cents, or 0.3%, at $86.31. For the week, Brent gained 1.4%.

Crude prices lost much of their upward momentum after Federal Reserve Governor Christopher Waller, one of the central bank’s biggest hawks on interest rates, said he desires more monetary tightening despite evidence that inflation in the United States was coming off four-decade highs. Higher rates benefit the dollar.

Oil markets rallied earlier in the day after the Paris-based International Energy Agency, IEA, said demand for crude could hit a record peak in 2023, helped by a spike in consumption by top importer China.

But the IEA also warned that the surprise oil output cut announced earlier this month by producer group OPEC+ risks exacerbating a projected supply deficit and could scupper economic recovery.

“Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly,” the IEA said. “This augurs badly for the economic recovery and growth.”

OPEC+ groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 independent oil producers, including Russia. The wider alliance announced on April 3 that it will cut a further 1.7 million barrels daily from its output, adding to an earlier pledge from November to take off 2.0M barrels per day. 

OPEC+, however, has a history of over-promising and under-delivering on production cuts. While the group achieved over-compliance on promised cuts in the aftermath of the 2020 coronavirus breakout, experts say that was more a result of battered demand that led to minimal production, rather than a will to cut barrels as pledged.