Oil Rises As OPEC+ Output Cuts, Despite Concerns About Demand From China & US

by | Mar 6, 2024 | Daily News, Environmental News

Home » Environmental News » Oil Rises As OPEC+ Output Cuts, Despite Concerns About Demand From China & US

 

Oil rises as OPEC+ output cuts on Wednesday after several days of declines, driven by signs of supply tightness resulting from output cuts by major producers. Brent crude futures saw an increase of 17 cents to reach $82.21 a barrel at 0440 GMT, following four consecutive sessions of decline. Similarly, U.S. West Texas Intermediate crude futures rose by 19 cents, reaching $78.34 a barrel, after experiencing declines over the past two days.

Oil rises as OPEC+ output cuts

Concerns Over Demand Growth in China and the U.S.

China’s announcement of an economic growth target of approximately 5% for 2024, made on Tuesday, lacked significant stimulus measures to bolster the struggling economy. This has raised concerns about potential lagging demand growth in the country for the year. Tony Sycamore, a market analyst at IG in Sydney, stated, “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.

Moreover, anticipation is building for U.S. Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony to Congress, scheduled for Wednesday and Thursday, as well as Friday’s release of U.S. employment data. Analysts are expecting an increase of 200,000 jobs in February, following January’s surge of 353,000. Powell’s remarks and the employment data could offer clearer insights into U.S. interest rates, with indications of a Fed cut viewed positively for both the economy and oil demand.

Support from OPEC+ Output Cuts

Despite concerns over demand, oil prices were buoyed by the recent announcement 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. This extension has contributed to supply tightness, particularly in Asian markets. Additionally, disruptions in oil tanker movements resulting from attacks in the Red Sea by the Houthi militia in Yemen have further constrained supply, tying up barrels in transit.

Daniel Hynes, ANZ’s senior commodity strategist, acknowledged a “risk-off tone” in the markets despite “ongoing signs of tightness in the physical market.” He noted that the oil rises as OPEC+ output cuts are gradually impacting the market. Evidence of this physical tightness was observed as Saudi Arabia, the world’s largest oil exporter, announced slightly higher prices for April crude sales to Asia, its largest market.

The first of this week’s two U.S. inventory reports, from the American Petroleum Institute industry group, revealed that U.S. crude stocks rose by 423,000 barrels in the week ended March 1, significantly less than the anticipated increase of 2.1 million barrels according to analysts. Gasoline inventories dropped by 2.8 million barrels, while distillate fuel stocks fell by 1.8 million barrels, as per the API data. Official data from the U.S. Energy Information Administration is awaited on Wednesday at 10:30 a.m. ET (1530 GMT).

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Author

  • Sarah Tancredi

    Sarah Tancredi is an experienced journalist and news reporter specializing in environmental and climate crisis issues. With a deep passion for the planet and a commitment to raising awareness about pressing environmental challenges, Sarah has dedicated her career to informing the public and promoting sustainable solutions. She strives to inspire individuals, communities, and policymakers to take action to safeguard our planet for future generations.

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