Brent driven by sentiment these days - Vanda Insights

Front-month ICE Brent has moved $0.65/bbl higher on the day, to $92.45/bbl at 09.00 GMT.

PHOTO: The Oxford's Institute of Energy Studies predicts Brent in a price range between $70-110/bbl in 2023. Getty Images

Upward pressure:

Sentiment is currently driving Brent as supply and demand fundamentals are largely stable, according to Vandana Hari of Vanda Insights. In her opinion, a souring demand outlook is “largely baked in”, so “any downward pressure may be slow-acting.”

Iranian Finance Minister Ehsan Khandozi has stated that while the US is rushing to reach a nuclear agreement, "Iran will not make any concessions to the American side" and that the country will act “within the red lines” of the Islamic Republic.

Downward pressure:

The Oxford's Institute of Energy Studies (OIES) has predicted that recession concerns, tightening monetary policy and slow growth in China will dampen global oil demand growth.

As OIES points out in its monthly oil report, weaker global growth will overshadow supply constraints and potential disruptions caused by Russia. It has downgraded its global oil demand growth forecast to 1.8 million b/d in 2022 and to 1.7 million b/d in 2023.

China has reported a 3.9% increase in third-quarter GDP from a year ago, beating Reuters analysts’ forecast of 3.4%. Though the number indicates a near-term expansion fuelled by government policies, it remains far below the Communist Party's 5.5% economic growth target. A zero-covid policy by the Chinese government and restrictions across the country has led to a slowdown in retail sales and crude oil imports.

Fed policymakers have indicated there could be another 75-basis point hike on the cards when they meet next month. Interest rate hikes typically push the US dollar up and make Brent and other commodities priced in dollars more expensive for buyers.

By Konica Bhatt

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