Brent declines as macroeconomic headwinds counter supply-side concerns

Front-month ICE Brent has inched lower by $0.29/bbl on the day from Friday, to $85.75/bbl at 09.00 GMT.

PHOTO: Flags of OPEC+ countries. Getty Images

Upward pressure:

Forecasts of higher global oil demand and a subsequent shortage of supply this year are supporting Brent futures.

OPEC has projected global oil demand to increase by 2.3 million b/d this year to 101.9 million b/d. The International Energy Agency (IEA) has also forecast a "record" world oil demand of 101.9 million b/d this year.

The IEA has warned that this “record” world oil demand, led by recovery in Chinese consumption and surprise production cuts by OPEC+, will push the world oil supply down by 400,000 b/d by the end of this year.

The US Energy Information Administration (EIA) has also trimmed its global liquid fuel production forecast by 300,000 b/d from its March forecast. In its April short-term outlook, the EIA has forecast OPEC crude oil production to average 33.7 million b/d this year. This is down by 400,000 b/d from its previous forecast.

Downward pressure:

OPEC has forecast a decline in the US and European summer oil demand in the second quarter of this year amid concerns over an economic slowdown and rising interest rates.

“Some mild recession is definitely on the table” in the US – since the Federal Reserve has raised benchmark interest rate by “almost 500 basis points in a year”, Chicago Fed President Austan Goolsbee has told CNBC.

By Konica Bhatt

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