Oil prices rose on Thursday, December 14, extending the previous session's gains, boosted by a weaker dollar and as the International Energy Agency (IEA) lifted its oil demand forecast for next year. The world oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in its monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for US and lower oil prices.

Brent futures were up $2.49, or 3.4 per cent, to $76.75 a barrel. US West Texas Intermediate (WTI) crude climbed $2.41, or 3.50 per cent, to $71.88, according to news agency Reuters. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, was last trading higher by 3.87 per cent at ₹6,005 per bbl, having swung between ₹5,797 and ₹6,020 per bbl during the session so far, against a previous close of ₹5,781 per barrel.

India bought Russian oil at $84.2/bbl in October, highest since December 2022: Report

What drove crude oil prices?

-IEA's 2024 oil demand estimate is less than half the forecast of the Organization of the Petroleum Exporting Countries and its allies (OPEC+). A weaker dollar after the US central bank signalled lower borrowing costs for 2024 also boosted oil prices.

-The dollar dropped to a fresh four-month low on Thursday after the US Federal Reserve's latest economic projections indicated the interest rate hike cycle has ended and lower borrowing costs are coming in 2024.

-Lower interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil. A weaker dollar makes oil less expensive for foreign purchasers.

-The European Central Bank, meanwhile, pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.

-The US Energy Information Administration (EIA) said energy firms withdrew a bigger-than-expected 4.3 million barrels of crude from stockpiles in the week ended December 8 as imports fell. 

Where are prices headed?

In the previous session, crude oil exhibited significant volatility, rebounding from its lows following a larger-than-anticipated draw in US oil stocks and an attack on an oil tanker in the Red Sea. 

In the Red Sea off Yemen's coast, a tanker was targeted by gunmen in a speedboat and missiles, marking the latest incident to jeopardize the shipping lane after Yemeni Houthi forces cautioned against travel to Israel. 

Also, the US Federal Reserve opted to keep interest rates unchanged, causing the dollar index to plummet after the Fed meeting, potentially providing support to oil prices. 

‘’Anticipating ongoing volatility, we note that crude oil has support levels at $69.05–68.40 and resistance at $70.80-71.40. In terms of the Indian Rupee (INR), crude oil finds support at ₹5,710-5,640, with resistance at ₹5,860-5,940,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.