After experiencing extended declines, oil prices showed signs of rebounding on Wednesday. Signs of supply tightness amid output cuts by major producers offset demand growth concerns in China and the U.S., the world’s two biggest crude consumers.
By 6:24 GMT, Brent crude futures saw a 0.32 percent increase to $83.30. Meanwhile, West Texas Intermediate crude futures increased by 0.33 percent, to $78.41 a barrel.
China’s economic growth
China’s announcement of an economic growth target of around 5 percent for 2024 raised concerns among investors. The lack of significant stimulus plans to support the country’s economy led to apprehensions about potential lagging demand growth which weighed down on oil prices in previous sessions. The market awaited more details on how China plans to achieve that goal and was hoping to see further fiscal expansion to help meet the growth target.
Focus on Federal Reserve
Investors are closely monitoring U.S. Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony to Congress, scheduled for Wednesday and Thursday. Moreover, the market awaits the release of U.S. employment data on Friday. Moreover, economists expect Friday’s U.S. non-farm payrolls data to show an increase of 200,000 jobs in February after surging 353,000 in January. Clearer insights on U.S. interest rates from Powell and the employment data could influence market sentiment, oil prices and demand projections. Hence, signs of a Fed interest rate cut would be positive for the economy and oil demand.
OPEC+ output cuts
The recent extension of output cuts of 2.2 million barrels per day by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) until the end of the second quarter has contributed to supply tightness, particularly in Asian markets. Additionally, disruptions in oil tanker movements due to Red Sea tensions have tied up barrels in transit, further supporting oil prices.
Analysts recognized the cautious sentiment prevailing in the markets, despite continued indications of tightness in the physical market. They noted that the effects of the OPEC+ cuts are gradually impacting oil prices and the overall market. This physical tightness was evident in Saudi Arabia, the largest oil exporter globally, announcing slightly elevated prices for April crude sales to Asia, its largest market.
Read: Gold prices hover near 3-month high on cautious investor sentiment
U.S. inventory data
The American Petroleum Institute’s (API) inventory report indicated a smaller-than-expected increase in U.S. crude stocks, with a rise of 423,000 barrels in the week ended March 1. According to the API data, gasoline inventories saw a significant drop of 2.8 million barrels, while distillate fuel stocks fell by 1.8 million. Official data from the U.S. Energy Information Administration is awaited later today at 15:30 GMT.
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