Oil prices rebounded slightly on Wednesday after extended declines as signs of supply tightness amid output cuts by major producers overrode demand growth concerns in China and the U.S., the world’s two biggest crude consumers.
Brent crude futures were up 17 cents to $82.21 a barrel at 0440 GMT after falling in the previous four sessions, while U.S. West Texas Intermediate crude futures rose 19 cents to $78.34 a barrel, after declining the past two days.
China’s economic growth target for 2024 of around 5% set on Tuesday lacked big-ticket stimulus plans to prop up the country’s struggling economy, which increased concerns that demand growth in the country may lag this year.
“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,” said Tony Sycamore, a market analyst at IG in Sydney.
Markets are looking ahead to U.S. Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony to Congress on Wednesday and Thursday and Friday’s U.S. employment data, Sycamore said.
Friday’s U.S. non-farm payrolls data is expected to show an increase of 200,000 jobs in February after surging 353,000 in January, according to a Reuters survey of economists.
Powell’s comments and the jobs data could provide clearer direction on U.S. interest rates, and signs of a Fed cut would be seen as positive for the economy and oil demand.
Still, oil prices were supported by the announcement on Sunday that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) extended their output cuts of 2.2 million barrels per day until the end of the second quarter.
The extension has created some supply tightness, particularly in Asian markets, along with the disruption in oil tanker movements as a result of the Red Sea attacks by the Houthi militia in Yemen that is tying up barrels in transit.
Daniel Hynes, ANZ’s senior commodity strategist, acknowledged the “risk-off tone” to the markets in a note on Wednesday, despite “ongoing signs of tightness in the physical market.” He added that the OPEC+ cuts are “slowly making their way through the market.”
Signs of the physical tightness were apparent as Saudi Arabia, the world’s biggest oil exporter, announced on Wednesday slightly higher prices for April crude sales to Asia, its biggest market.
The first of this week’s two U.S. inventory reports, from the American Petroleum Institute industry group, showed U.S. crude stocks rose by 423,00 barrels in the week ended March 1, market sources said, much smaller than the increase of 2.1 million barrels, expected by analysts in a Reuters poll.
Gasoline inventories dropped by 2.8 million barrels and distillate fuel stocks fell by 1.8 million barrels, the API data showed, according to the sources.
Official data from the U.S. Energy Information Administration is due on Wednesday at 10:30 a.m. ET (1530 GMT).
(Reporting by Laura Sanicola in New York and Andrew Hayley in Beijing; Editing by Christian Schmollinger)