Investing.com– Oil prices settled higher Wednesday, as a smaller-than-expected increase in crude supplies pointed to improving demand just as Fed chief Jerome Powell reinforced expectations for rate cuts this year.
By 14:30 ET (19.30 GMT), the futures rose 1.3% to settle at $79.13 a barrel and the contract climbed 1.1% to $82.96 a barrel.
US inventories grow less than expected
Inventories of U.S. crude rose by 1.4 million barrels in the week ended Mar. 1, below estimates of an increase of 2.4M barrels, and less than the huge 4.2M barrels build seen in the prior week amid growing signs that refinery action continues to improve.
Refinery activity rose 3.4% to 84.9% as U.S. refineries restarted production after an extended winter and maintenance break- a trend that is expected to further tighten crude markets in the world’s biggest fuel consumer amid rising gasoline demand.
, one of the products that crude is turned into, fell 4.5M barrels against expectations of a draw of 1.6M barrels with distillate stockpiles barrels, compared with expectations for a decline of about 1M barrels.
Powell sees rate cuts later in year, stoking demand hopes
Adding to the positive news Wednesday, Fed chief Powell stated that the rate-setting Federal Open Market Committee “does not expect that it will be appropriate” to slash borrowing costs down from more than two-decade highs at this point.
However, Powell also noted that the Fed’s recent tightening cycle is “likely” at its peak, adding that, should the economy evolve as expected, “it will likely be appropriate to begin dialing back policy restraint at some point this year.”
A cut in interest rates would likely stimulate activity in the world’s largest consumer of energy.
Red Sea tensions rise as tighter supply optimism gains
Tensions in the Red Sea, a key oil shipping route, ratcheted up and raised supply disruption fears after a Houthi missile attack struck a Greek-owned cargo ship, near Yemen, killing at least two people.
The attack added to fears about potential oil supply disruptions and fueled hopes about tighter global supplies in the wake of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, recent announcement to extend output cuts of 2.2 million barrels per day until the end of the second quarter.
(Ambar Warrick contributed to this article.)
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