Brent edges down on demand growth concerns

The front-month ICE Brent contract inched $0.03/bbl lower on the day, to trade at $82.01/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent’s price drew modest support from political jitters in the Middle East, following the death of Iranian President Ebrahim Raisi on Sunday. The country’s state-owned news agency IRNA confirmed that the country will hold presidential elections on 28 June.

“The challenging geopolitical backdrop is keeping traders on edge,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Iran-backed Houthi militants in Yemen possess weapons capable of reaching the Mediterranean Sea, Bloomberg reported citing senior US defense officials. This news has elevated concerns about supply disruptions in the global oil market.

“The US said Houthis have weapons that can reach the Mediterranean Sea, raising concerns about potential strikes on shipping beyond the Red Sea and Gulf of Aden,” Hynes added.

OPEC+'s next decision on supply cuts is “also hovering over the [oil] market,” Hynes further remarked. The group is scheduled to convene early next month.

Downward pressure:

Brent futures inched lower amid growing concerns about a slowdown in global oil demand.

The US Federal Reserve (Fed) has released minutes from the latest Federal Open Market Committee (FOMC) meeting. The minutes showed that the US central bank could further tighten interest rates if inflationary pressures remain elevated.

‘Brent crude… fell sharply on the release of the Fed minutes,” Hynes added.

The Fed’s bearish remarks have weighed on the oil market’s expectation of a steady demand growth this year, as the central bank could maintain interest rates at current levels for longer than expected.

The US Energy Information Administration (EIA) reported an unexpected weekly build in US crude stocks. Commercial crude oil inventories in the US increased by 1.8 million bbls to 459 million bbls in the week that ended 17 May.

“[Brent] crude sentiment also took a knock from the EIA data showing a rise of about 1.83 million barrels in domestic crude inventories,” VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder

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