Oil prices steady at 4-½ mth high on tight supply outlook, Fed awaited
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Investing.com– Oil prices hovered near a 4-½ month high in Asian trade on Tuesday as softer exports from Iraq and Saudi Arabia furthered the notion of tighter markets this year, although sentiment remained on edge before a Federal Reserve meeting.
Brent oil futures expiring in May rose 0.1% to $86.93 a barrel, while West Texas Intermediate crude futures steadied at $82.19 a barrel by 20:14 ET (00:14 GMT). Both contracts rose over 2% on Monday and were close to highs last seen in early-November.
Oil buoyed by tight supply outlook
Oil prices surged over the past week as signs of increased U.S. refinery activity, improved Chinese demand and persistent disruptions in the Middle East presented a tight outlook for oil markets.
This notion was furthered by Iraq- the Organization of Petroleum Exporting Countries’ second-biggest producer- stating that it will cut crude exports to compensate for higher production so far in 2024.
Data from Saudi Arabia showed crude exports from OPEC’s biggest producer fell for a second straight month in January. In Russia, Ukrainian attacks put a key fuel refinery out of commission.
Signs of tighter supplies also come amid some improving economic indicators from major crude consumers, specifically China. The country’s industrial production and fixed asset investment grew more than expected in the first two months of 2024, while travel demand also recovered to pre-COVID levels during the Lunar New Year holiday.
But it remains to be seen whether China can carry this momentum into the coming months, especially as consumer spending still remains weak. Unemployment also unexpectedly rose in the January-February period.
Fed, PMIs awaited for more economic cues
Focus was now squarely on the conclusion of a two-day Fed meeting on Wednesday, where the central bank is widely expected to keep interest rates on hold.
But markets were wary of any more hawkish signals from the central bank, given that the U.S. economy remained largely resilient, while inflation turned sticky in the past two months.
While strength in the U.S. economy bodes well for fuel demand in the world’s biggest fuel consumer, higher-for-longer rates could potentially stymie demand later in 2024.
Beyond the Fed, focus this week is also on a barrage of purchasing managers index readings for March, from the U.S. and other major economies.
