Brent gets a boost from positive economic outlook

The front-month ICE Brent contract has gained $1.38/bbl on the day, to trade at $87.17/bbl at 09.00 GMT.

PHOTO: An oil pumpjack placed in front of the US Dollar bill. Getty Images

Upward pressure:

Optimistic market sentiments after the US Federal Reserve's (Fed) decision to keep current interest rates unchanged have supported Brent futures today.

“The Fed’s decision to keep interest rate hikes on pause for a second consecutive time has bolstered economic sentiment and supported commodity prices, including energy,” said two analysts from ING Bank.

Meanwhile, growing tensions in the Middle East coupled with disruptions caused by the Russian invasion of Ukraine could put oil markets into “uncharted waters,” World Bank’s latest Commodity Markets Outlook Report stated.

Global oil supply could be reduced by 6 million b/d to 8 million b/d if the conflict causes “large disruptions”, the bank said. “That would drive prices up by 56% to 75% initially—to between $140 and $157 a barrel,” it added.

“The global oil market is still extremely tight, and we don’t have any room for any disruptions of supply,” said Price Futures Group’s senior market analyst Phil Flynn. “The [oil] market awaits more headlines on the progress of the Israeli invasion of Gaza,” he further added.

Downward pressure:

Brent futures felt some downward pressure today due to weak demand projections from China.

China’s purchasing managers’ index (PMI) declined to 49.5 in October from 50.2 in the previous month, data from China’s National Bureau of Statistics (NBS) showed earlier this week. A reading below 50 indicates contraction.

By Aparupa Mazumder

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