Oil prices picked up slightly on Wednesday after a period of extended decline in prices as supply began tightening amid major output cuts that set aside the demand concerns from China and the US, the two largest consumers of crude oil.
Brent crude oil futures were by 17 cents to $82.21 per barrel, after falling for previous four sessions, while US West Texas Intermediate crude oil futures went up by 19 cents to $78.34 a barrel, after declining for the past two days.
China had set up its economic growth targets at 5% for the year 2024, but it requires huge stimulus packages to shore up the frailing economy, which increased the concerns of crude oil demand growth this year.
Tony Sycamore, a market analyst at IG in Sydney said that, “The market wanted more details on how China intends to achieve its 5% growth target for 2024 and specifically was hoping to see further fiscal expansion to help meet the growth target.”
ALSO READ: Oil extended losses over a strengthening dollar in 2024
Looking Ahead to the USÂ Â
As oil prices have picked up as output cuts placed by OPEC+ nations have set aside the demand concerns from the oil buying giants, the markets are looking ahead for positive news from the United States.
Markets are eagerly waiting for the U.S. Federal Reserve Chair Jerome Powell’s semi-annual testimony on monetary policy to the Congress on Wednesday and Thursday, and the release of U.S. employment data on Friday, as per Tony Sycamore.
U.S farm’s payroll data, which is also due to be released on Friday, is expected to show an increase of 200,000 jobs in the month of Feb., according to the Reuters survey.
Powell’s comments and jobs data will be providing a clearer picture on U.S. interest rates and signs of rate cuts would be seen as positive for oil demand and for the economy as a whole.
Still, oil prices have picked up based on the announcement done on Sunday that the OPEC+ countries would be extending their output cuts of nearly 2.2 million barrels per day until the end of June.
This extension has created some contraction in the supply chain, particularly in the Asian markets, coupled with the disruption in the movement of oil tankers from the Red Sea due to attacks by the Yemeni Houthis.
DONT FORGET: Nvidia briefly crosses $2 trillion valuation amid AI craze
The impact is showing
Daniel Hynes, a senior commodity strategist at ANZ, acknowledged the “risk-off tone” to the markets in a note on Wednesday, “despite ongoing signs of tightness in the physical market. He said that “the OPEC+ cuts are slowly making their way through the market.”
Signs of the crude oil supply shrinking became visible as Saudi Arabia, the biggest oil exporting country, announced slightly higher prices of crude oil sales to Asia for the month of April on Wednesday.
The U.S oil stock report shows that the oil stocks have risen in the past week by 423,000 barrels, but much smaller than an expected increase of 2.1 million barrels. Meanwhile, distillate fuel inventory went down by 1.8 million barrels, and Gasoline stocks dropped by 2.8 million barrels.
