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Crude Oil News Today: Influenced by China Demand Outlook, OPEC+ Supply Impact

By:
James Hyerczyk
Updated: Mar 5, 2024, 12:50 UTC

Key Points:

  • China targets 5% growth, affecting global oil consumption.
  • OPEC+ sustains output cut, signaling tighter global oil supply.
  • Oil market cautious ahead of API inventory report release.
Crude Oil News Today

In this article:

Steady-to-Lower Ahead of API Inventory Report

Crude oil prices are trading steady to lower on Tuesday, balancing between OPEC+ supply constraints and concerns over China’s economic growth and global interest rate cuts.

At 10:29 GMT, Light Crude Oil Futures are trading $78.37, down $0.37 or -0.47%.

China and Demand

China’s economic forecast for 2024 targets a growth of about 5%, mirroring last year’s goal. This ambition, announced by Chinese Premier Li Qiang, indicates a commitment to economic growth despite challenges such as the country’s property crisis and local government debt. However, the lack of significant stimulus plans led to investor disappointment. Despite these issues, China’s leadership prioritizes steady growth, albeit with an acknowledgment of the difficulties in achieving these targets. The strategy involves improving structural imbalances and adopting pro-market reforms.

OPEC+ Impact on Supply

The decision by OPEC+ members to extend their voluntary output cuts of 2.2 million barrels per day into the next quarter signifies a probable tightening of the global oil balance. This strategic move is expected to counterbalance any immediate bearish impacts, indicating an underlying strength in the oil market.

Fed Influences

Uncertainties in global economic prospects, including the pace of interest rate cuts by major economies like the United States, also weigh on the oil market. The Federal Reserve, as voiced by Atlanta Fed President Raphael Bostic, indicates no immediate need for interest rate cuts due to a robust economy. However, the Fed maintains a cautious stance, balancing economic strength against potential inflationary pressures.

Inventory Report Focus

Market attention is also on the upcoming U.S. inventory reports, expected to reveal an increase in crude stocks and a decline in distillates and gasoline stockpiles. These reports are crucial in assessing the short-term supply and demand dynamics in the oil market. The American Petroleum Institute (API) releases its weekly report at 21:30 GMT.

Short-Term Forecast

In the short term, the oil market appears cautiously optimistic. The combination of OPEC+’s supply restraint and potential inventory declines could support higher prices. However, persistent global economic uncertainties and China’s economic challenges present downside risks. Overall, the market outlook leans slightly bullish, contingent on forthcoming economic data and geopolitical developments. Traders should be alert to a possible reaction to US ISM Services PMI data at 15:00 GMT.

Technical Analysis

Daily Light Crude Oil Futures

Light Crude Oil futures are putting in a mixed performance on Tuesday as traders balance the potential of lower global demand against another attempt to tighten supply by OPEC+.

The longer-term trend is up, which indicates traders are betting on OPEC+ to have a positive impact on global supply. Technically, this uptrend will remain intact as long as the market holds above the 200 day moving average at $74.59. Should upside momentum resume on a strong trade through $80.85, then $82.68 will become the next target price.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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