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Business News/ Markets / Commodities/  Oil prices rise 2% on smaller build in US crude stocks as Fed signals rate cuts in 2024; Brent nears $84/bbl
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Oil prices rise 2% on smaller build in US crude stocks as Fed signals rate cuts in 2024; Brent nears $84/bbl

OPEC+ led by Saudi Arabia and Russia agreed earlier this week to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter or mid-2024.

FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia. REUTERS/Alexander Manzyuk/File Photo (REUTERS)Premium
FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia. REUTERS/Alexander Manzyuk/File Photo (REUTERS)

Oil prices climbed about two per cent on Wednesday, March 6, on a smaller-than-expected build in US crude inventories, a big withdrawal from distillate and gasoline stockpiles and remarks by the US Federal Reserve chair Jerome Powell that he still expects US interest rate cuts this year. Lower interest rates could increase demand for oil by boosting economic growth.

Brent futures rose $1.65, or two per cent, to $83.69 a barrel. US West Texas Intermediate (WTI) crude rose $2.07, or 2.7 per cent, to $80.22. Brent was on track for its first daily rise in five days, according to news agency Reuters.

Also Read: Explained | Why did OPEC+ members extend oil output cuts to mid-2024

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a March 19 expiry, was last trading 2.42 per cent higher at 6,638 per bbl, having swung between 6,484 and 6,671 per bbl during the session, against a previous close of 6,481 per barrel.

What's driving crude oil prices?

-The Organisation of Petroleum Exporting Countries and its allies (OPEC+) led by Saudi Arabia and Russia agreed earlier this week to extend voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter or mid-2024.

-The US Energy Information Administration (EIA) said energy firms added a smaller-than-expected 1.4 million barrels of crude into stockpiles during the week ended March 1, while distillate and gasoline inventories fell by much more than expected.

-For crude stocks, that compares with the 2.1-million barrel build analysts forecast in a Reuters poll and the 0.4-million barrel build shown in data from the American Petroleum Institute (API), an industry group. 

-US Federal Reserve Chair Jerome Powell said the central bank still expects to reduce its benchmark interest rate later this year, though policymakers still needed "greater confidence" in inflation's continued decline.

-Investors see signs of a Fed cut as positive for the economy and oil demand. US private payrolls increased slightly less than expected in February, data showed, bolstering the case for rate cuts.

Also Read: US Fed signals rate cuts in 2024; Powell says progress towards 2% inflation target ‘not assured’

Where are prices headed?

Crude oil experienced significant price volatility, extending its decline amid concerns over Chinese demand. However, a decrease in US oil stocks helped support prices. The market is apprehensive about China's execution of its ambitious growth plan. Furthermore, crude oil prices were influenced by ceasefire talks between Israel and Hamas, according to analysts.

‘’The decrease in U.S. oil stocks has played a role in supporting oil prices. Crude oil prices are anticipated to remain volatile. The support for crude oil is identified at $76.80–$76.10, with resistance positioned at $78.30–$79.00. In terms of INR, crude oil has support at 6,410–6,340, while resistance is expected at 6,560–6,610,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Published: 06 Mar 2024, 10:29 PM IST
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