Wednesday saw a rise in oil prices, overcoming concerns related to demand growth in China and the United States, the world’s largest crude consumers, due to supply tightness resulting from production cuts by major producers.
Brent crude futures experienced a hike of 77 cents or 0.94%, reaching $82.81 per barrel by 1351 GMT after witnessing a decline in the previous four sessions.
Similarly, U.S. West Texas Intermediate (WTI) crude futures increased by $1.09 or 1.39%, to $79.24 per barrel, rebounding from a two-day drop.
The support for oil prices came after the OPEC+ alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, announced on Sunday the extension of production cuts amounting to 2.2 million barrels per day until the end of the second quarter.
This extension has led to a supply shortfall, particularly in Asian markets, along with disruptions in oil tanker movements due to attacks in the Red Sea by the Yemeni Houthi group.
Signs of supply tightness became evident when Saudi Arabia, the world’s leading oil exporter, announced a slight increase in its crude oil selling prices for April to Asia, its largest market, on Wednesday.
China’s economic growth target for 2024, set at around 5%, lacks significant stimulus plans to support the struggling economy, raising concerns that demand growth in China might lag this year
. Beijing announced this target on Tuesday, leaving the market desiring more details on how China plans to achieve this 5% growth target in 2024, particularly looking for signs of fiscal expansion to aid in reaching this growth objective.
Market analyst Tony Sycamore from IG in Sydney commented, “The market wanted more details on how China intends to achieve the 5% growth target for 2024 and was specifically hoping to see more fiscal expansion to help meet the growth goal.”
The markets are also keenly awaiting Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony before Congress on Wednesday and Thursday, as well as the U.S. employment data on Friday.
In prepared remarks for Congress on Wednesday, Powell stated that the Federal Reserve still anticipates a rate cut later this year, although policymakers need “more confidence” in the continuing decline of inflation before implementing any reduction.
Investors view signals of a rate cut from the Federal Reserve as positive for the economy and oil demand.
The non-farm payroll data in the United States, expected on Friday, is predicted to show an addition of 200,000 jobs in February, following a 353,000 job increase in January, according to a Reuters survey.
Meanwhile, ceasefire talks in Gaza reached an impasse on Wednesday, adding uncertainty and concerns about the potential escalation of conflict in the Middle East, a key oil-producing region.
Market sources reported that the first of this week’s two U.S. inventory reports, released by the American Petroleum Institute, showed a smaller-than-expected increase in U.S. crude inventories by 423,000 barrels for the week ending on March 1, significantly less than the 2.1 million barrel rise analysts had forecast in a Reuters survey.
Data from the institute also showed a decrease in gasoline inventories by 2.8 million barrels and a drop in distillate stockpiles by 1.8 million barrels. The official data from the U.S. Energy Information Administration is due on Wednesday at 1530 GMT.
If the Energy Information Administration reports an increase in crude oil stocks, it would mark the sixth consecutive week of rising oil inventories in the country.
