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Investing.com — Oil prices edged lower Tuesday, but remained near a four-month high as softer exports from Iraq and Saudi Arabia furthered the notion of tighter markets this year, although sentiment remained on edge before a Federal Reserve meeting. 

By 08:55 ET (12:55 GMT), the futures traded 0.1% lower at $82.08 a barrel and the contract fell 0.1% to $86.83 a barrel. 

Both contracts rose over 2% on Monday and were close to highs last seen in early November. 

Oil buoyed by tight supply outlook 

Oil prices have surged over the past week as signs of increased U.S. refinery activity, improved Chinese demand and persistent disruptions in the Middle East presented a tight outlook for oil markets.

This notion was furthered by Iraq, the second biggest producer in the Organization of Petroleum Exporting Countries, stating that it will cut crude exports to compensate for higher production so far in 2024.

“The move is primarily to absorb the oversupply from Jan’24-Feb’24 and to showcase the nation’s commitment to stick to its voluntary oil cuts as part of the OPEC+ agreement,” according to analysts at ING, in a note.

“Recent OPEC numbers showed that Iraq pumped 0.2m b/d of oil above its agreed quota of 4m b/d last month.”

Data from Saudi Arabia also showed crude exports from OPEC’s biggest producer fell for a second straight month in January. In Russia, Ukrainian attacks put a key fuel refinery out of commission.

Signs of tighter supplies also come amid some improving economic indicators from major crude consumers, specifically China. The country’s and grew more than expected in the first two months of 2024, while travel demand also recovered to pre-COVID levels during the Lunar New Year holiday.

It remains to be seen whether China can carry this momentum into the coming months, especially as consumer spending still remains weak. also unexpectedly rose in the January-February period. 

Fed, PMIs awaited for more economic cues

The focus is now squarely on the conclusion of a two-day on Wednesday, where the central bank is widely expected to keep interest rates on hold. 

But markets were wary of any more hawkish signals from the central bank, given that the U.S. economy has remained largely resilient to the higher interest rates, while inflation remained elevated over the past two months.

While strength in the U.S. economy bodes well for fuel demand in the world’s biggest fuel consumer, higher-for-longer rates could potentially stymie demand later in 2024.

Beyond the Fed, focus this week is also on a barrage of readings for March, from the U.S. and other major economies. 

U.S. crude stocks due – API

The announces its estimate of U.S. crude inventories later in the session. 

U.S. crude stocks unexpectedly fell by about 5.5 million barrels last week, compared with a build of 423,000 barrels reported by the API for the previous week. Economists were expecting an increase of about 400,000 barrels.