Oil prices saw a modest increase on Wednesday after a series of declines, as concerns over supply constraints following production cuts by major producers outweighed worries about demand growth in China and the U.S., the world’s leading consumers of crude oil. Brent crude futures rose by 27 cents to $82.31 a barrel by 0745 GMT, following a drop in the previous four sessions, while U.S. West Texas Intermediate (WTI) crude futures increased by 36 cents to $78.51 a barrel, after falling for two consecutive days.
The economic growth target for China in 2024 was set at around 5% on Tuesday, but the lack of substantial stimulus measures to boost the struggling economy raised concerns about potential lagging demand growth in the country. Market analyst Tony Sycamore of IG in Sydney highlighted the market’s disappointment over the absence of detailed fiscal expansion plans to support China’s growth target.
Market focus is also shifting towards the U.S. with Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony to Congress and the forthcoming U.S. employment data. The non-farm payrolls data, expected on Friday, could influence the Federal Reserve’s stance on interest rates, which in turn affects the economy and oil demand.
Despite these concerns, oil prices found support from the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to extend their output cuts of 2.2 million barrels per day until the end of the second quarter. This extension has led to supply tightness, particularly in Asian markets, and has been exacerbated by disruptions in oil tanker movements due to attacks in the Red Sea by the Houthi militia, which has affected the availability of barrels in transit.
Saudi Arabia, the world’s largest oil exporter, responded to the tight market by raising its crude oil prices for April sales to Asia, its largest market. In the U.S., the American Petroleum Institute reported a smaller-than-expected increase in crude stocks, alongside significant decreases in gasoline and distillate fuel inventories, signaling ongoing tightness in the physical oil market. The official data from the U.S. Energy Information Administration is expected to provide further insights.