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U.S. Oil Prices Rise Amid Higher Demand
Oil prices saw a surge on Wednesday, buoyed by a smaller increase in crude supplies than was anticipated, hinting toward a recovering demand. This escalation of prices was mirrored by the Federal Reserve Chairman Jerome Powell's confirmation of prospect rate reductions in the year.
By 2:30 PM ET (7.30 PM GMT), U.S. crude futures had increased by 1.3% to land at $79.13 per barrel. The Brent contract witnessed a 1.1% rise, settling at $82.96 per barrel.
Lower Than Estimated Growth in U.S. Inventories
In the week ending Mar. 1, U.S. crude inventories rose approximately by 1.4 million barrels. This fell short of the projected 2.4 million barrel increase, and was a significant drop from the 4.2 million barrels added in the previous week. This underlines the continuing improvement in refinery performance.
Refinery operations bounced back by 3.4% to 84.9% as refineries in the U.S. resumed production after a prolonged winter and maintenance hiatus. This is a trend that is anticipated to tighten crude markets further in the largest fuel-consuming nation, owing to increased gasoline demand.
Gasoline stocks, one of the primary outputs of crude did not meet expectations as well, dipping by 4.5 million barrels as compared to the forecasted 1.6 million barrel reduction. Distillate inventory also came down by 4.1 million barrels compared to the anticipated decline of around 1 million barrels.
Powell's Forecast for Rate Cuts Bolsters Demand Expectations
Rate cuts later in the year were also suggested by the Federal Reserve Chairman Powell, sparking anticipation for greater demand. While he stated that it would not be "appropriate" to decrease borrowing costs from highs of over two decades, Powell added that the apex of the Fed's latest tightening cycle is likely reached and could recede, given the economy progresses as projected.
A reduction in interest rates could stimulate activity in the world's number one energy consumer.
Tensions in the Red Sea Encourage Optimism for Tighter Supply
Tensions mounted in the Red Sea, a primary oil shipping route, following a missile attack by Houthi on a Greek cargo ship near Yemen, which resulted in at least two casualties. The attack intensified concerns regarding potential oil supply disturbances, sparking expectations for tighter global supplies in light of OPEC+’s recent decision to extend the reduction of daily production by 2.2 million barrels until the end of the second quarter.
