Oil buoyed by US interest rate clues

FE Team | Published: February 01, 2024 21:03:17

LONDON, Feb 01 (Reuters): Oil prices edged higher on Thursday, boosted by the US Federal Reserve signalling a possible start to interest rate cuts.
There was limited immediate price impact after two OPEC+ sources said that the Thursday meeting of the group of oil-producing countries - including Saudi Arabia, Russia and allies - left production policy changes off its agenda.
Brent crude futures were up 68 cents at $81.23 a barrel by 1140 GMT. US West Texas Intermediate crude futures gained 65 cents to $76.50.
OPEC+ will soon have to decide whether to extend beyond March the 2.2 million barrels per day (bpd) of voluntary oil production cuts announced last November.
Federal Reserve Chair Jerome Powell on Wednesday said that interest rates had peaked and would move lower in coming months, with inflation continuing to fall and an expectation of sustained economic growth.
Lower interest rates and economic growth help oil demand.
But Powell declined to promise that rate cuts would come as early as the Fed's March 19-20 meeting, as investors had hoped.
China, the world's second-biggest economy, revealed new support measures to help to reduce fallout from the liquidation of property developer Evergrande.
Analysts at JPMorgan said they expected China to remain the single largest contributor to global oil demand growth in 2024, forecasting that Chinese demand would grow by 530,000 barrels per day (bpd), having jumped by 1.2 million bpd last year.
"Geopolitics aside, our view remains that 2024 will be fundamentally a healthy year for the oil market and we recommended using December's sell-off as a buying opportunity," JPMorgan said in a client note.
In another glimmer of better economic news, the downturn in Germany's manufacturing sector eased in January, a survey showed on Thursday.
In the Middle East, worries over attacks by Yemen-based Houthi forces on shipping in the Red Sea are driving up costs and disrupting global oil trading. The Houthi group also said it would keep up attacks on US and British warships in what it called acts of self defence.
"The energy market remains on edge as it waits for a US response to the drone attack on American troops in Jordan," ANZ Research said in a note.
Meanwhile, a meeting of the top ministers of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, has reportedly kept oil output policy unchanged.
The officials met online on Thursday to discuss market fundamentals.
The Joint Ministerial Monitoring Committee can call for a full OPEC+ meeting or make recommendations on policy.
"The JMMC reviewed the crude oil production data for the months of November and December 2023 and noted the high conformity for participating OPEC and non-OPEC countries," OPEC said in a statement issued after the meeting.
OPEC+, however, will soon have to decide whether to extend 2.2 million barrels per day of voluntary oil output cuts which expire at the end of March.
Saudi Arabia alone accounts for nearly half of those cuts at 1 million bpd.