Oil prices fell slightly on Wednesday as concerns about demand growth in China, the world’s biggest crude importer, clashed with signs of supply tightness amid output cuts by major producers. Prices were also supported by a weaker U.S. dollar which helps demand for buyers paying in other currencies.
Brent crude futures fell 13 cents to $81.91 a barrel by 0045 GMT, while U.S. West Texas Intermediate crude futures fell 11 cents to $78.04 a barrel. 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.
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The ‘risk off’ nature of recent trading was underscored by the fall in Treasury yields, which also pressured oil prices. Gold prices hit a record high on Tuesday on rising bets for a U.S. interest rate cut in June. Still, oil prices were supported by falling U.S. dollar and 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.
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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. “Crude oil futures edged lower amid the risk-off tone across markets. This comes despite ongoing signs of tightness in the physical market.” said Daniel Hynes, ANZ senior commodity strategist, in a note on Wednesday, adding that the OPEC+ cuts are “slowly making their way through the market.”
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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). If the EIA reports a crude storage build, it will be the sixth straight week of rising oil stocks in the country.
