Brent in limbo as a stronger US dollar outweighed demand growth expectations

The front-month ICE Brent contract inched $0.06/bbl up on the day, to trade at $84.73/bbl at 09.00 GMT.

PHOTO: Steel oil pipes from refinery in desert during sunset. Getty Images

Upward pressure:

Brent futures gained after the International Energy Agency (IEA) revised up its global oil demand growth forecast for this year due to increased consumption of bunker fuels amid the ongoing conflict in the Red Sea.

The IEA raised its oil demand growth forecast for 2024 by 110,000 b/d to 1.3 million b/d.

“This heightened demand is driven by more commercial vessels opting for longer routes around Africa due to security concerns in the Red Sea transit corridor,” stated SPI Asset Management’s managing partner Stephen Innes.

Despite the Middle Eastern crisis not directly impacting physical supply in the global oil market, tensions from the Houthi-led insurgency in the Red Sea have raised supply concerns in the crude oil sector.

Additionally, the energy agency has adjusted its supply surplus estimates in the oil market to a marginal deficit, assuming OPEC+ will extend its additional voluntary cut agreement through 2024.

Downward pressure:

The US dollar surged today at its fastest rate in eight weeks following a 0.6% month-on-month increase in the US producer price index (PPI) for February, as reported by Reuters. Analysts noted that a stronger US dollar exerted downward pressure on Brent futures as it makes buying crude oil more costly for holders of non-dollar currencies.

The PPI measures the average change in prices received by domestic producers for their goods and services. A higher PPI can diminish market expectations of rate cuts by the US Federal Reserve (Fed) and strengthen the US dollar.

“The [price] rally was eventually tempered by higher US yields and a stronger US dollar,” Innes remarked.

By Tuhin Roy

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