Oil up on OPEC+ cuts, US Fed chief seeing rate cuts in 2024

© Reuters. FILE PHOTO: A flare burns excess natural gas in the Permian Basin in Loving County, Texas, U.S. November 23, 2019. REUTERS/Angus Mordant//File Photo

By Paul Carsten

LONDON (Reuters) -Oil prices rebounded slightly on Wednesday, on supply tightness amid output cuts from major producers and remarks from the U.S. central bank chief that he still expects rate cuts later this year.

Brent crude futures were up $1.04, or 1.27%, to $83.08 a barrel at 1428 GMT, after four days of declines. U.S. West Texas Intermediate crude futures rose $1.40, or 1.79%, to $79.55 a barrel, after declining the past two days.

Oil prices were lifted by the announcement on Sunday that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) extended 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.

That physical tightness was 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.

In remarks prepared for Congress on Wednesday, Powell said the Fed still expects to reduce its benchmark interest rate later this year, though policymakers still needed “greater confidence” in inflation’s continued decline before cutting.

Investors see signs of a Fed cut as positive for the economy and oil demand. In a good sign for cuts, U.S. private payrolls increased slightly less than expected in February, data showed on Wednesday.

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.

On Tuesday, China announced a 2024 economic growth target of around 5%, though the lack of big-ticket stimulus plans to bolster its struggling economy raised concerns of sluggish oil demand growth.

The market “specifically was hoping to see further fiscal expansion to help meet the growth target,” said Tony Sycamore, an analyst at IG in Sydney.

Meanwhile, Gaza ceasefire talks were at an impasse on Wednesday, fuelling uncertainty and worry that the conflict may spill over into the broader Middle East, one of the world’s main oil-producing regions.

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.

Official data from the U.S. Energy Information Administration is due on Wednesday at 10:30 a.m. ET (1530 GMT).

U.S. oil refiners are expected to have about 1.5 million barrels per day (bpd) of capacity offline for the week ending March 8, increasing available refining capacity by 270,000 bpd, research company IIR Energy said on Wednesday.