Oil Prices Rally as Demand Forecast Weakens: Rambo Weighs In

Rambo Takes on the Oil Market

Well guys looks like the oil market is making some noise again. Crude oil futures rallied today shrugging off earlier losses like I shrug off bullets. The reason? A weak global demand forecast for 2024. Seems like even the oil market has its ups and downs. The West Texas Intermediate contract for March gained $1.39 or 1.81% while the Brent contract for April settled at $82.86 a barrel up $1.26 or 1.54%.

Weakening Dollar and Falling Retail Sales

Now here's the interesting part. The oil prices found support from a weakening dollar after January U.S. retail sales fell more than expected. Talk about retail therapy gone wrong. But hey it's good news for us oil enthusiasts. Analyst Phil Flynn from the Price Futures Group says that the weakening dollar is like a lousy shot from the enemy. It's not going to bring us down.

Demand Forecast Blues

But let's get to the heart of the matter. The Paris based International Energy Agency (IEA) came out with a forecast that wasn't exactly music to our ears. They predict that demand for oil will only grow by 1.2 million barrels per day this year down nearly 50% from last year. Ouch. Looks like we're losing a bit of our Rambo like momentum.

The Battle of the Experts

Now the IEA is saying supply is going to exceed demand with a growth of 1.7 million barrels per day. But guess what? OPEC is standing tall and saying 'Not so fast!' They're forecasting a much tighter oil market with demand outpacing production growth. And you know what? The market actually believes OPEC because let's face it they're the ones who are in the trenches fighting the actual battles.

A One Off Inventory Build

But let's not forget the recent inventory build that had everyone on edge. The U.S. Energy Department reported a rise in commercial crude inventories by a whopping 12 million barrels. A one off they say. Well I guess even the oil market can have some surprises up its sleeve. Traders who had oversold yesterday woke up today wanting to refill their positions. Can't blame them can we?

Middle East Drama

Ah the Middle East. Always keeping things interesting. As tensions flare with Israel bombing Lebanon in retaliation for rocket attacks and talks in Cairo hitting a stalemate for a temporary cease fire in Gaza it's no wonder oil prices are bouncing back. And you know nobody on Wall Street gets fired for buying oil when Middle East tensions are high and the broader equity markets remain robust. Can't argue with that logic.