Oil prices experienced an upward surge on Thursday, propelled by optimistic demand forecasts from both the International Energy Agency (IEA) and the Organization of the Petroleum Producing Countries (OPEC). The positive momentum was further fuelled by disruptions in U.S. oil output and escalating geopolitical tensions in the Middle East.

Brent crude futures saw a gain of 37 cents, reaching $78.25 per barrel by 1005 GMT, reflecting a 0.5% increase. Simultaneously, U.S. West Texas Intermediate crude futures witnessed a rise of 55 cents, marking a 0.8% increase and reaching $73.11.

The IEA's latest monthly report revised its outlook, anticipating a growth of 1.24 million barrels per day (bpd) in global oil demand for 2024. This figure represents an increase of 180,000 bpd from the IEA's previous projection, with factors such as improved economic growth and lower crude prices in the fourth quarter contributing to the upward revision.

In alignment with the IEA's positive forecast, OPEC announced on Wednesday its expectations for demand growth of 2.25 million bpd in 2024, maintaining the same forecast as December. Additionally, OPEC projected a robust increase in oil demand to 106.21 million bpd in 2025.

Fatih Birol, the Executive Director of the IEA, expressed confidence in a "comfortable and balanced position" for oil markets in 2024, even amid concerns over tensions in the Middle East, rising supply, and a potential slowdown in demand growth.

Despite geopolitical risks, such as recent attacks by Yemen-based Houthi militants in the Red Sea, oil markets have exhibited range-bound trading in recent days. Ehsan Khoman, an analyst at MUFG bank, noted that investors seem to be downplaying concerns about potential tanker attacks in the region. The attacks led to the diversion of numerous cargoes around Africa, resulting in increased journey times and costs. In response, the U.S. conducted additional strikes against Houthi targets in Yemen, heightening tensions in the region.

In the United States, a key oil-producing state, North Dakota, witnessed a decline in oil output by 650,000 to 700,000 bpd due to extreme cold weather conditions, according to state reports.

The market is now anticipating the release of U.S. government data on oil inventories at 11 a.m. ET (1600 GMT) on Thursday. Preliminary figures from the American Petroleum Institute indicate a rise in domestic crude stockpiles by 480,000 barrels during the previous week.

The surge in oil prices on Thursday can be attributed to positive demand forecasts from both the IEA and OPEC, coupled with supply disruptions and geopolitical tensions. The market remains vigilant to evolving geopolitical dynamics and potential impacts on oil supply chains, emphasizing the intricate interplay between global events and energy markets.