Oil Holds Near Four-Month High as IEA Flips Forecast to Deficit

(Bloomberg) -- Oil held near a four-month high after the International Energy Agency forecast a supply deficit through 2024, changing its earlier projection of a surplus, on the premise OPEC+ maintains production cuts.

Brent edged lower to near $85 a barrel after rising 4.3% over the previous two sessions. West Texas Intermediate was close to $81. The IEA assumes that OPEC and its allies will retain their curbs for the rest of the year to “balance oil markets,” it said in a monthly report on Thursday.

The global benchmark is up by around 4% this week, having also been supported by the first drop in US stockpiles since January and heightened geopolitical tensions after Ukraine attacked another Russian refinery.

Oil futures have now broken out of a narrow range they had been trading in this year, but there are still headwinds that may limit further gains. These include rising non-OPEC supply, China’s demand concerns and persistent US inflation that’s pushing back expectations for interest rate cuts.

The IEA revision and the US stockpile data have supported prices, but Brent will most likely to retreat to the low $80s, said Vandana Hari, founder of Vanda Insights. The IEA forecast only moved closer to consensus and the US will likely intervene with Ukraine over the drone attacks on Russia, she added.

Timespreads have narrowed this month, signaling easing concerns about tight supply. The gap between Brent’s two nearest contracts was at 67 cents a barrel in backwardation, compared with close to $1 toward the end of last month.

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