Oil steadies on OPEC+, underwhelming China reforms

Miniatures of oil barrels and a rising stock graph are seen in this illustration taken Jan 15, 2024. REUTERS/Dado Ruvic/Illustration/file photo

LONDON – Oil steadied on Tuesday after falling in the previous session as the prospect of a tighter market due to OPEC+ supply restraint offset concern over Chinese growth and uncertainty over the pace of interest rate cuts.

China set an economic growth target for 2024 of around 5 percent, similar to last year’s goal and in line with analysts’ expectations, but the lack of big ticket stimulus plans to prop up its struggling economy disappointed investors.

READ: China sets ambitious 5% growth target for 2024

Brent crude was up 15 cents, or 0.2 percent, to $82.95 a barrel by 0911 GMT, while U.S. West Texas Intermediate (WTI) fell 21 cents, or 0.3 percent, to $78.53. Brent has gained almost 8 percent this year.

“Despite yesterday’s somewhat disappointing reaction to the OPEC+ extension, the global oil balance is most likely set to tighten, helping prices rebound from any dips caused by actual or perceived short-term bearish developments,” said Tamas Varga of oil broker PVM.

Some members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday extended their voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter.

READ: OPEC+ producers extend oil output cuts to second quarter

“The market has been moving higher in recent weeks amid improving fundamentals. Rising spot prices indicate the physical market has begun to tighten amid a host of other supply-side disruptions,” analysts at ANZ said in a note on Monday.

As well as China, concern about wider economic prospects also weighed, in part reflecting uncertainty over the pace of interest rate cuts by the United States and other major economies.

The U.S. Federal Reserve is under no urgent pressure to cut interest rates given a “prospering” economy and job market, Atlanta Fed President Raphael Bostic was reported on Monday as saying.

In focus is the latest round of U.S. inventory reports, which are expected to show crude stocks increased about 2.6 million barrels last week, while distillates and gasoline stockpiles are forecast to decline.

The first of this week’s two inventory reports, from the American Petroleum Institute industry group, is due out at 2130 GMT.