Oil Slips as Weaker IEA Demand Outlook Offsets Rate Cut Hopes

Oil Slips as Weaker IEA Demand Outlook Offsets Rate Cut Hopes
Oil barrels are pictured at the site of Canadian group Vermilion Energy in Parentis-en-Born, France, on Oct. 13, 2017. (Regis Duvignau/Reuters)

LONDON—Oil slipped on Friday as a forecast of slowing demand by the International Energy Agency offset support from geopolitical tensions and hopes that the U.S. Federal Reserve might cut interest rates sooner than expected.

Weighing on sentiment, the IEA said on Thursday that global oil demand growth was losing momentum and it trimmed its 2024 growth forecast, in contrast to the view held by the Organization of the Petroleum Exporting Countries (OPEC).

“There was a tentative attempt to recover yesterday morning, but hopes were shattered after the IEA published its updated supply-demand outlook,” said Tamas Varga of oil broker PVM.

Brent crude futures were down 53 cents, or 0.6 percent, at $82.33 a barrel at 0915 GMT. U.S. West Texas Intermediate crude futures fell 33 cents to $77.70.

Both contracts climbed over 1 percent on Thursday as a larger-than-expected drop in U.S. retail sales prompted hopes the Federal Reserve will soon start cutting interest rates, which could be positive for oil demand.

“Hopes for U.S. rate cuts provided support on Thursday, but investors are now adjusting their positions ahead of a long weekend in the U.S.,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

Tension in the Middle East provided continued support, with analysts saying the risk of a wider Middle East conflict could continue to guide crude prices.

Israeli forces said on Thursday they had raided the biggest functioning hospital in Gaza, while Hezbollah said it fired dozens of rockets at a northern Israeli town in a “preliminary response” to the killing of 10 civilians in southern Lebanon, the deadliest day for Lebanese civilians in four months of cross-border hostilities.

“I would expect the latest gains from an increased Mideast risk premium to stick, especially going into the weekend,” said Vandana Hari, founder of oil markets analysis provider Vanda Insights.

By Alex Lawler