By Scott DiSavino
NEW YORK (Reuters) - Oil prices edged up about 1% on Wednesday on a smaller-than-expected build in U.S. crude inventories, a big withdrawal from distillate and gasoline stocks and remarks by the U.S. Federal Reserve chief that he still expects interest rate cuts this year.
Lower interest rates could increase oil demand by boosting economic growth.
Brent (LCOc1) futures rose 92 cents, or 1.1%, to settle at $82.96 a barrel, while U.S. crude rose 98 cents, or 1.3%, to settle at $79.13.
That put Brent up for the first time in five days.
The U.S. Energy Information Administration (EIA) said energy firms added a smaller-than-expected 1.4 million barrels of crude into stockpiles during the week ended March 1, while distillate and gasoline inventories fell by much more than expected.
For crude stocks, that compares with the 2.1-million barrel build analysts forecast in a Reuters poll and the 0.4-million barrel build shown in data from the American Petroleum Institute (API), an industry group. [EIA/S] [EIA/A]
Energy firms also pulled 4.1 million barrels out of distillate stockpiles, which include diesel and heating oil, and 4.5 million barrels out of gasoline stockpiles last week.
That compares with analysts forecasts for much smaller weekly withdrawals of 0.7 million barrels of distillates and 1.6 million barrels of gasoline.
“The draw down in gasoline and distillates has the market’s attention. This is a wake up call that we have a very tight market,” Price Futures Group analyst Phil Flynn said.
In remarks prepared for Congress, U.S. Federal Reserve Chair Jerome Powell said the central bank still expects to reduce its benchmark interest rate later this year, though policymakers still needed "greater confidence" in inflation's continued decline.
Complicating the Fed's decision, however, were reports providing mixed signals. U.S. private payrolls increased slightly less than expected in February, bolstering the case for rate cuts, while data showing an uptick in U.S. economic activity from early January through late February supported the case for leaving rates unchanged.
The U.S. dollar slipped to a one-month low against a basket of other currencies after Powell's comments.
A weaker dollar can boost demand for oil by making the fuel cheaper for buyers using other currencies.
AROUND THE WORLD
China announced a 2024 economic growth target of around 5%, though the lack of big-ticket stimulus plans to bolster its struggling economy raised concerns of sluggish oil demand growth.
The market "specifically was hoping to see further fiscal expansion to help meet the growth target," said Tony Sycamore, an analyst at IG in Sydney.
Meanwhile, talks on a ceasefire and hostage exchange between Israel and Hamas were at an impasse as the humanitarian crisis in Gaza deepened and a merchant vessel was on fire after a fatal attack in the Red Sea.
The disruption in oil tanker movements due to Red Sea attacks by the Iran-backed Houthi militia in Yemen, along with the latest OPEC+ supply cut extension, was causing supply tightness, especially in Asian markets.
That tightness was apparent as Saudi Arabia, the world's biggest oil exporter, announced slightly higher prices for April crude sales to Asia, its biggest market.
OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies like Russia.