Brent declines as market shifts focus to weak demand signals
The front-month ICE Brent contract lost $1.08/bbl on the day, to trade at $82.70/bbl at 09.00 GMT.
PHOTO: Oil pump jacks. Getty Images
Upward pressure:
Brent futures moved higher in recent weeks on the back of several supply-side concerns.
On Sunday, several members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced the extension of voluntary output cuts until June-end.
“Rising spot prices indicate the physical market has begun to tighten amid a host of other supply side disruptions,” said ANZ Bank’s senior commodity strategist Daniel Hynes.
Brent’s price gained more support after the ongoing conflict in the Red Sea saw further escalation. Iran-backed Houthis launched two ballistic anti-ship missiles at M/V MSC SKY II, a Liberian-flagged and Swiss-owned container vessel yesterday, the US Central Command (CENTCOM) said.
One missile caused some damage to the vessel, US CENTCOM confirmed.
“While tensions in the Middle East have yet to directly impact supply, the Red Sea disruptions have increased the time oil is unavailable to the market,” Hynes added.
Downward pressure:
Brent’s price shed the previous day’s gains as weak demand growth projections weighed on market sentiments.
Oil market analysts are not fully convinced with China’s economic reform pledges that are expected to boost oil demand in the Asian country.
“Oil prices retreated despite initial gains, highlighting concerns about demand that overshadowed OPEC+'s widely anticipated decision to extend output cuts,” said SPI Asset Management’s managing partner Stephen Innes.
Chinese Premier Li Qiang pledged to transform the country's economic development model and control industrial overcapacity in 2024. He has set an economic growth target of 5% for China this year, Reuters reported.
“The downward trend in oil prices signals unease among traders regarding global economic growth, with potential complications arising from China beyond current expectations,” Innes added.
By Aparupa Mazumder
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