H.G Markets:

On Wednesday, oil prices rose, supported by industry data indicating a significant and unexpected decrease in U.S. inventories. Brent oil futures increased by 0.8% to $82.56 per barrel, while West Texas Intermediate crude futures also rose by 0.8% to $77.88 per barrel. Despite this recent increase, crude prices remained within a trading range of $75 to $85 per barrel, with mixed signals regarding supply and demand.

Economic concerns in China, the largest importer of oil, continued to impact oil markets. Additionally, the strength of the U.S. dollar, following higher-than-expected U.S. inflation data, put pressure on crude prices. However, ongoing disruptions in the Middle East kept the risks of potential supply shocks elevated, preventing any significant decline in crude prices. Recent Ukrainian drone strikes on a major Russian refinery raised concerns about tighter global fuel markets. These strikes occurred shortly after Russia suspended all fuel exports to stabilize local fuel markets ahead of an upcoming Presidential election.

U.S. inventory data provided some positive signals to oil markets. According to the American Petroleum Institute, inventories decreased by 5.5 million barrels in the week ending March 8, compared to expectations of a 0.4 million barrel build-up. This drawdown occurred as more local refiners resumed production after an extended winter break, indicating some short-term tightness in U.S. oil markets. However, this tightness is expected to remain limited, especially with local fuel demand showing little signs of increasing from a winter lull. The API data typically foreshadows a similar trend in official inventory data, which is scheduled for release later on Wednesday.

On the demand side, OPEC maintained its forecast for global oil demand to increase by 2.25 million barrels per day in 2024, and by 1.85 million barrels per day in 2025. In its monthly report, the cartel attributed this increase in demand to an anticipated reduction in interest rates and an improvement in global economic conditions. OPEC recently announced that it will maintain its current rate of production cuts until the end of June. This, coupled with potential supply disruptions in the Middle East, is expected to tighten oil markets by the middle of the year. Apart from OPEC, a monthly report from the International Energy Agency is also expected later this week.