Brent falls on slow demand growth projections

The front-month ICE Brent contract moved $1.00/bbl lower on the day, to trade at $82.18/bbl at 09.00 GMT.

PHOTO: Oil pump jacks. Getty Images

Upward pressure:

Supply tightness in the global oil market has supported Brent’s upward move this week.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies are expected to extend voluntary production cuts through the second quarter of this year at their upcoming meeting, which is scheduled in the first week of March, analysts said.

“The market looks ahead to OPEC’s decision on the extension of its current supply agreement,” said ANZ Bank’s senior commodity strategist Daniel Hynes.

Brent’s price will remain elevated if the Saudi-led coalition decides to extend its 2.2 million b/d supply cut into the second quarter of this year. “OPEC will extend the current supply agreement to the end of the second quarter,” Rystad Energy’s head of upstream research Espen Erlingsen said.

Downward pressure:

Brent futures plunged today due to concerns about slowing demand growth in the world’s leading oil consumers – the US and China.

“A bearish EIA inventory report weighed on the OPEC+ supply cut expectations,” said two analysts from ING Bank.

Commercial crude oil inventories in the US increased for the fifth straight week, adding 4 million bbls to reach 447.16 million bbls on 23 February, according to the US Energy Information Administration (EIA), indicating sluggish demand growth in the country.  

China’s state-owned National Petroleum Corporation (CNPC) expects oil demand growth in the country to ease this year due to a slow pace of post-COVID recovery.

“The corporation now expects Chinese oil demand to grow by a modest 1% to 764 mt (15.3 million b/d), the lowest demand growth forecast in at least a decade excluding the COVID-19-affected period,” ING Bank’s analysts added.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online