By Ambar Warrick
Investing.com-- Oil prices rose on Thursday as the U.S. energy watchdog forecast slightly higher demand and tighter supply going into 2023, although concerns over weakening economic growth kept prices pinned near eight-month lows.
Prices also took some relief from weakness in the dollar, which retreated from 20-year highs ahead of a European Central Bank meeting.
London-traded Brent oil futures, the global benchmark, rose 1.1% to $88.47 a barrel, while U.S. West Texas Intermediate crude oil futures rose 0.8% to $82.59 by 20:56 ET (00:56 GMT).
Both contracts slumped to their lowest levels since January on Wednesday, after weak economic prints from China, interest rate hikes and a surprise rise in U.S. inventories brewed concerns over slowing demand.
But the U.S. Energy Information Administration (EIA) said in its monthly Short-Term Energy Outlook report that it expects global crude demand to increase in the fourth quarter of 2022 and the first quarter of 2023, as rising natural gas prices drive countries to switch to heating oil in winter. The watchdog also forecast lower U.S. oil production this year, a trend that is expected to benefit prices.
Europe in particular could see increased demand as it struggles with an energy crisis triggered by Russia's shutting off a key natural gas pipeline to the bloc.
The EIA expects Brent oil to average around $98 through the fourth quarter. But it also expects global crude demand to decline in 2023 from 2022.
In the near-term, oil prices are under pressure from a slew of weak demand signals. Data on Wednesday showed China’s crude imports slumped nearly 10% in August, as economic growth in the world’s largest oil importer slowed to a crawl.
Markets also feared rising interest rates across the globe, which tend to weigh on spending and dent crude demand. Canada hiked rates to a 14-year high on Wednesday, while the ECB is set to turn rates positive for the first time in 11 years later in the day.
Additionally, data from the American Institute of Petroleum showed that U.S. crude stockpiles unexpectedly rose last week, raising concerns over slowing global oil demand. But a drop in gasoline stockpiles showed that demand among U.S. consumers remained strong.
Oil prices tumbled from highs hit earlier this year, as traders feared that rising interest rates and slowing economic growth will weigh on crude demand.