Brent falls on demand concerns from China

The front-month ICE Brent contract lost $1.19/bbl on the day from Friday, to trade at $81.03/bbl at 09.00 GMT.

PHOTO: Oil prices tumbling down. Getty Images

Upward pressure:

A rocket strike on a football ground in the Israeli-occupied Golan Heights on Saturday killed 12 people including children, according to a Reuters report. This news has heightened fears of a wider conflict in the Middle East. Israel and the US blamed the attack on the Lebanese armed group Hezbollah, but Hezbollah denied responsibility.

In response, Israel has vowed to retaliate against Hezbollah in Lebanon, and Israeli jets targeted southern Lebanon on Sunday. This has sharply escalated geopolitical tensions in the Middle East and supported Brent crude oil prices.

Besides, efforts for a Gaza ceasefire have hit a roadblock as Israel seeks changes to a truce plan and the release of hostages by Hamas, complicating a final deal to end the conflict that has devastated the region, according to Reuters sources. This situation has also contributed to the rise in Brent futures.

Oil market participants are eagerly awaiting the outcome of the OPEC+ Joint Ministerial Monitoring Committee meeting, which is scheduled to convene on Thursday. “While the committee is not expected to recommend any changes to output policy, the more recent weakness would be a concern,” head of commodities strategy at ING Warren Patterson said.

Additionally, market participants are focused on Venezuela after the country's electoral authority announced President Nicolas Maduro had won a third term with 51% of the vote, despite exit polls indicating an opposition victory.

“We have serious concerns that the result announced does not reflect the will or the votes of the Venezuelan people,” U.S. Secretary of State Antony Blinken said.

Downward Pressure:

Concerns about slow oil demand growth in China weighed on Brent futures.

Data from the General Administration of Customs showed China's total fuel oil imports fell by 11% in the first half of 2024.

Additionally, the number of rigs drilling for crude oil and natural gas increased by two to 586 units in the US last week, according to Baker Hughes, contributing to downward pressure on Brent's price.

The next key events for markets to assess the oil market trajectory are the US Federal Reserve's decision on interest rate cuts and China's manufacturing PMI.

By Tuhin Roy

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