- Crude oil notched year-to-date highs on Wednesday, driven by inventory updates and Fedspeak.
- In testimony on Wednesday, Jerome Powell said the Fed is still looking to cut rates this year.
- Conflict in the Middle East, Red Sea turmoil, and sanction on Russian oil have buoyed crude prices.
Crude oil prices spiked on Wednesday following new data signaling smaller growth in crude inventories and after the Federal Reserve chief’s latest messaging on rate cuts.
West Texas Intermediate saw a brief surge of nearly 3.2%, reaching $80.67 per barrel, while intraday trading saw the May Brent crude oil futures contract climb by 1.54% to hit $83.3 per barrel.
The uptick followed data from the US Energy Information Administration showed energy companies added a smaller amount of crude to inventories than expected last week, signaling higher demand. Gasoline stockpiles, meanwhile, saw a steep drop.
Fed Chair Jerome Powell’s testimony to Congress on Wednesday also helped the demand narrative, as he reiterated the central bank’s plans to cut rates this year. Looser Fed policy could stimulate the economy, increasing demand for oil and energy products, especially if the Fed can pull off a soft landing and avoid a recession.
Powell said the Fed is keeping the door open for rate cuts this year, contingent on “greater confidence” in sustainable inflation toward the 2% target.
Crude prices have inched up in 2024, thanks to OPEC’s daily 2.2 million barrel production cut planned for the first quarter, while the Israel-Hamas war, attacks on shipping lanes in the Red Sea, and the West’s sanctions on Russia’s oil trade have kept a floor under the price of oil in 2024.
OPEC announced on Sunday that some member states would extend existing output cuts to June.
