Brent futures set to soar over 7% on the week on demand recovery hopes

Front-month ICE Brent has climbed by $1.40/bbl on the day, to $84.33/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent prices have been pushed higher by a “strong risk appetite” aided by increasing confidence in China’s recovery in economic activity and oil demand, says ANZ commodity strategist Daniel Hynes.

The US dollar has slipped to a nine-month low after consumer price inflation data indicated the first decline in US inflation since May 2020. US Federal Reserve's interest rate hikes are expected to slow due to falling inflation. When the US dollar weakens, dollar-denominated oil futures like Brent become cheaper for buyers holding other currencies, which can boost demand.

Craig Erlam, a senior market analyst at OANDA says “China could bounce back strongly, especially if backed by monetary and fiscal stimulus. Central banks may discover they have room to cut [interest] rates if inflation falls substantially and economies are in a recession.”

Downward pressure:

While Brent continues to rise, a bleak global economic outlook for this year casts a shadow over the market optimism.

The World Bank is the latest to warn that the global economy could tip into recession this year, predicting global GDP growth of just 1.7% - the slowest pace outside the 2009 and 2020 recessions since 1993.

By Konica Bhatt

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