Oil prices settled higher on Tuesday, with Brent crude futures rising 29 cents, or 0.4%, to $81.92 a barrel and U.S. West Texas Intermediate (WTI) crude futures gaining 16 cents, or 0.2%, to settle at $77.90. The gains come as the U.S. Energy Information Administration (EIA) raised its global oil demand growth forecast for the year, while OPEC maintained its forecast for relatively strong growth in 2024.

The EIA increased its 2024 world oil demand growth forecast to 1.10 million barrels per day (bpd) from a previous estimate of 900,000 bpd. This upward revision, coupled with OPEC's optimistic outlook citing expectations for travel and tourism in the second half of the year, has bolstered market sentiment and contributed to the recent price recovery.

"We're now at least considering the idea that maybe demand will pick up in the second half, and the market may actually need some additional OPEC+ supply," said Tim Evans, an independent energy analyst. "The market was becoming somewhat oversold... We're getting a bit of a trampoline effect."

The rebound in oil prices comes after fears of oversupply had pushed Brent crude to close at $77.52 a week earlier, its lowest since February. However, the extension of most oil output cuts by OPEC and its allies well into 2025, with a plan to phase out the cuts over the course of a year from October 2024, has helped alleviate concerns of excess supply.

In addition to the positive demand outlook, a drop in U.S. crude oil inventories has further supported the price recovery. According to market sources citing American Petroleum Institute figures, U.S. crude oil stocks fell by 2.428 million barrels in the week ended June 7, exceeding expectations of a slightly over one million barrel decline.

The EIA also projected that U.S. crude oil output in 2024 would rise more than previously forecast to 13.24 million barrels, its highest ever. Despite this increase in domestic production, the overall market balance appears to be tightening, with OPEC+'s output cuts and strong demand expectations driving the recent price gains.

Traders are also keeping a close eye on macroeconomic data and central bank decisions that could impact oil demand. The World Bank slightly lifted its 2024 global growth outlook due to the U.S. economy's stronger-than-expected performance, but warned that overall output would remain well below pre-pandemic levels through 2026.

Financial markets are currently limiting expectations to only two 25-basis point rate reductions by the Federal Reserve this year, likely starting in September, with economists cautioning that there is a considerable risk of only one or no rate cuts in 2024. The release of U.S. consumer prices data for May and the conclusion of the Fed's two-day policy meeting on Wednesday are expected to provide further clarity on the interest rate outlook.

Meanwhile, the European Central Bank's chief economist, Philip Lane, emphasized the need for persistent restraint on economic growth given ample inflationary pressures, suggesting that the next rate cut should be delayed until uncertainty recedes.