Oil Rebounds as OPEC+ Measures Take Precedence over China, US Demand Issues
Oil prices experienced a modest rebound on Wednesday, following a prolonged decline, as concerns over supply constraints took precedence over worries about demand growth in China and the United States, the world’s two largest consumers of crude. Brent crude futures increased by 27 cents to reach $82.31 per barrel, recovering from losses in the previous four sessions. Similarly, U.S. West Texas Intermediate crude futures rose by 36 cents, reaching $78.51 per barrel after a decline in the two preceding days.
The rebound comes despite apprehensions about China’s economic growth target for 2024, set at around 5%, lacking substantial stimulus plans to bolster the struggling economy. Investors sought more details on how China planned to achieve this growth target, particularly hoping for additional fiscal expansion to support the goal, according to Tony Sycamore, a market analyst at IG in Sydney. Attention is now turning to U.S. Federal Reserve Chair Jerome Powell’s testimony to Congress and Friday’s U.S. employment data, with expectations of a positive impact on the economy and oil demand if signs of a Fed cut emerge.
Oil prices found support from OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announcing an extension of their output cuts of 2.2 million barrels per day until the end of the second quarter. This move has contributed to supply tightness, particularly in Asian markets, along with disruptions caused by Houthi militia attacks in the Red Sea, affecting oil tanker movements.
Daniel Hynes, ANZ’s senior commodity strategist, highlighted a “risk-off tone” in the markets despite signs of tightness in the physical oil market. He noted that the OPEC+ cuts are gradually influencing the market. Indications of physical tightness were evident as Saudi Arabia, the world’s leading oil exporter, announced slightly higher prices for April crude sales to Asia, its largest market.
In terms of inventory, the American Petroleum Institute (API) reported a smaller-than-expected increase in U.S. crude stocks by 423,000 barrels in the week ending March 1, contrary to the anticipated 2.1 million barrels in a Reuters poll. Gasoline inventories saw a decline of 2.8 million barrels, and distillate fuel stocks dropped by 1.8 million barrels, as per API data. Official data from the U.S. Energy Information Administration is awaited on Wednesday for further insights into the market dynamics.
