2023.12.1419:10:00UTC+00Oil Futures Settle Sharply Higher

Oil prices moved up sharply on Thursday, recording strong gains for a second straight day, lifted by a weak dollar and an upward revision in global oil demand forecast by the International Energy Agency (IEA).

Concerns about the security of Middle East supplies following a tanker attack in the Red Sea off Yemen's coast contributed as well to the uptick in oil prices.

Oil prices were also supported by Wednesday's data from the Energy Information Administration (EIA) showing a 4.3 million-barrel drop in crude inventories last week.

The dollar index dropped to 101.77, but recovered to 101.98 later on, but still trailed its previous close by about 0.9%.

The dollar tumbled on hopes for interest rate cuts after the U.S. Federal Reserve kept interest rates steady, as widely expected, and hinted at three rate cuts in 2024, citing easing inflation and slowing growth.

West Texas International Crude oil futures for January ended higher by $2.11 or about 3% at $71.58 a barrel.

Brent crude futures settled at $76.61 a barrel, gaining $2.35 or about 3.16%.

"The prospect of deep rate cuts from central banks next year has boosted the global economic prospects and in turn the price of oil," says Craig Erlam, Senior Market Analyst at OANDA, UK & EMEA. "The question now is whether central banks are responding just in time or whether it will prove to be just too late. Oil prices over the coming weeks may offer some insight into market expectations on that."

The IEA, which cut 2023 oil demand growth forecast by 90,000 bpd, has raised demand growth forecast for 2024 by 130,000 bpd to 1.1 million bpd.

OPEC+ lifted its estimate of 2023 global economic growth in its latest monthly report.

The cartel blamed the latest crude price slide on "exaggerated concerns" about oil demand growth and said it expects oil demand to grow by 2.2 million barrels per day next year.