Oil prices recovered slightly on Wednesday after prolonged declines as signs of a supply squeeze grew due to production cuts that went beyond concerns about rising demand in China and the United States, the world’s two biggest consumers of crude oil.
Brent crude oil futures were up 17 cents at $82.21 a barrel at 04:40 GMT, after falling in the previous four sessions, while WTI crude futures were up 19 cents at $78.34 a barrel, after falling in the last two days.
China’s economic growth target of about 5% for 2024 set on Tuesday lacked plans to support the country’s struggling economy, raising concerns that demand growth in the country could be delayed.
The market was awaiting more details on how China would achieve its 5% growth target for 2024 and was particularly hoping to see more fiscal easing to help meet the growth target.
Markets are eagerly awaiting Powell’s six-month monetary policy testimony to Congress on Wednesday and Thursday, as well as U.S. employment data on Friday.
Powell’s comments and employment data could provide a clearer direction for US interest rates, and signs of a Fed rate cut could be seen as positive for the economy and oil demand.
Still, oil prices were supported on Sunday by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) extending their 2.2 million barrel-per-day production cuts until the end of the second quarter.
The extension has created some supply shortages, especially in Asian markets. Disruptions in oil tanker movements continue due to attacks by the Houthi militia in Yemen in the Red Sea, where transit passage is provided.
The market remains risk-averse despite ongoing signs of tightness in the physical market, with the impact of OPEC+ cuts slowly spreading across the market.
Signs of a physical contraction were clear on Wednesday as Saudi Arabia, the world’s biggest oil exporter, announced slightly higher prices for April crude oil sales to Asia, its biggest market.
The American Petroleum Institute (API) inventory report showed US crude oil inventories increased by 423.00 barrels in the week ending March 1; This is much smaller than the 2.1 million barrel increase expected by analysts.
According to sources, API data showed that gasoline stocks fell by 2.8 million barrels and distillate fuel stocks fell by 1.8 million barrels.
Official data from the US Energy Information Administration will be released at 15:30 GMT on Wednesday.
