Brent falls on signs of weakening demand

The front-month ICE Brent contract lost $1.84/bbl on the day from Friday, to trade at $81.94/bbl at 09.00 GMT.

PHOTO: OPEC and world map. Getty Images

Upward pressure:

OPEC+’s decision to extend voluntary production cuts until June, has been tightening oil supply and boosting Brent futures in recent weeks.

“The announcement that the OPEC+ alliance would extend its voluntary production cuts of roughly 2mb/d [2 million b/d] until the end of the June quarter will likely see impact only get greater,” Daniel Hynes, a senior commodity strategist at ANZ Banks, noted.

Besides, an increase in Houthi attacks in the Red Sea and the stalled ceasefire talks in Gaza continue to support Brent's prices.

The US and its allies have been engaged in ceasefire negotiations ahead of the Muslim holy month of Ramadan. President Joe Biden voiced his support for these talks earlier this month.

Downward pressure:

Brent futures faced losses after China's producer price index (PPI) declined by 2.7% year-on-year in February. PPI indicates average change in prices received by domestic producers for their produce.

"The producer price index declined by 2.7% year-on-year, surpassing expectations and marking the 17th consecutive month of annual price declines. This ongoing trend indicates persistent deflationary pressures in the pipeline, hinting at soft [commodity] consumption demand,” SPI Asset Management’s managing partner Stephen Innes said.

“Deflation remains a significant concern among investors regarding China's economic landscape,” he further added.

Market analysts from VANDA Insights stated, "Crude futures were drifting lower... as economic and oil demand concerns returned."

By Tuhin Roy

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