OPEC+ Resurgence: Oil Prices Recover Despite China, U.S.
Oil prices saw a modest resurgence on Wednesday, staging a recovery after a prolonged downturn. Concerns over supply constraints took precedence, momentarily overshadowing worries about demand growth in China and the United States, the world’s top two consumers of crude. Brent crude futures experienced a rise of 27 cents, reaching $82.31 per barrel, bouncing back from losses sustained in the preceding four sessions. Similarly, U.S. West Texas Intermediate crude futures climbed 36 cents, hitting $78.51 per barrel after two consecutive days of decline.
This rebound occurred amid apprehensions regarding China’s 2024 economic growth target, set at around 5%, which lacked substantial stimulus plans to fortify the struggling economy. Investors eagerly awaited more details on China’s strategy to achieve this growth target, particularly hoping for additional fiscal expansion. Tony Sycamore, a market analyst at I.G. in Sydney, highlighted this sentiment, noting that attention had shifted to U.S. Federal Reserve Chair Jerome Powell’s congressional testimony and Friday’s U.S. employment data, anticipating a positive impact on the economy and oil demand if signs of a Fed cut materialized.
The support for oil prices also stemmed from OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announcing an extension of their output cuts, amounting to 2.2 million barrels per day, until the end of the second quarter. This decision contributed to supply tightness, especially in Asian markets, compounded by disruptions caused by Houthi militia attacks in the Red Sea, impacting oil tanker movements.
Daniel Hynes, ANZ’s senior commodity strategist, pointed out a prevailing “risk-off tone” in the markets despite signs of tightness in the physical oil market. He highlighted that the gradual influence of OPEC+ cuts on the market was becoming apparent. Indicators of physical tightness were evident as Saudi Arabia, the leading oil exporter globally, announced slightly higher prices for April crude sales to Asia, its largest market.
Regarding inventory, the American Petroleum Institute (API) reported a smaller-than-expected increase in U.S. crude stocks, rising by 423,000 barrels in the week ending March 1, contrary to the anticipated 2.1 million barrels in a Reuters poll. According to API data, gasoline inventories declined by 2.8 million barrels, and distillate fuel stocks dropped by 1.8 million barrels. Market participants are now awaiting official data from the U.S. Energy Information Administration on Wednesday for further insights into the oil market dynamics.
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