Brent gains on hopes of oil demand growth

The front-month ICE Brent contract moved $0.11/bbl up on the day, to trade at $83.21/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent futures gained following China’s latest economic measure that boosted hopes about demand growth in the country.

The country announced that it will start selling the first batch of its 1 trillion yuan ($138 billion) ultra-long term special treasury bonds this week. Ultra-long term special bonds are bonds issued by a country with an exceptionally long maturity period of 10 years or more.

“This move [by China] is seen as a significant step in boosting economic activity and supporting infrastructure projects, which in turn could increase demand for oil,” SPI Asset Management’s managing partner Stephen Innes said.

Brent’s price also gained on hopes of a surge in travel activity in the US during the summer holiday season in the country.

“The combination of China's economic measures and the anticipated surge in US holiday travel is driving optimism in the oil markets,” Innes added.

Brent’s price found additional support after Iraq’s oil minister Hayyan Abdul Ghani reiterated that the OPEC member is fully committed to supply cut pledges made within the oil producers’ group.

“Crude oil edged higher on signs of tightening supplies,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Brent futures felt some downward pressure as interest rates in the US remain at elevated levels amid strong inflationary pressures.

The US Federal Reserve’s (Fed) monetary policy measures have not been sufficient to bring inflation under the central bank's target of 2%, Dallas Fed President Lorie Logan said while speaking at the Louisiana Bankers Association conference last week.

The oil market’s focus will be on the US Consumer Price Index (CPI) number due tomorrow as it will “shed more light on the path the US Federal Reserve may take in the months ahead,” two analysts from ING Bank said.

“US CPI data for April will probably be the biggest driver for oil markets,” they added.

By Aparupa Mazumder

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