Brent in limbo as demand fears offset supply concerns

Front-month ICE Brent contract has shed $0.10/bbl on the day from Friday, to trade at $76.97/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has gained some upward momentum after the Israel-Hamas conflict rekindled crude oil supply concerns in the oil market. The Yemen-based Houthi militant organisation launched several drone attacks on commercial vessels sailing in the Red Sea over the weekend.

“Escalating shipping concerns in the Red Sea also added to the risk premium for oil,” said ING Bank’s head of commodities strategy Warren Patterson.

Container shipping line Mediterranean Shipping Company (MSC) said that it would avoid using the East-West trade route in the Suez Canal, after the Houthis attacked one of its vessels. On Friday, the Palatium III was attacked in the Bab al-Mandab Strait in the southern part of the Red Sea, according to Reuters.

Several shipping firms, including French container firm CMA CGM and Danish shipping company A.P. Moller-Maersk, have also said that they are suspending shipments across the Red Sea.

Downward pressure:

A weaker global crude oil demand projection for this year as a whole has contributed to cap Brent gains in recent days.

Brent futures have lost upward momentum after the International Energy Agency (IEA) revised its oil demand forecast downward. The Paris-based agency now projects that global oil demand will reach 101.7 million b/d this year, which is down by 300,000 b/d from its estimate in November.

“The monthly report from IEA was quite soft as demand was downgraded mostly from Europe,” Patterson commented.

“The agency [IEA] revised down demand estimates for 4Q23 [fourth quarter 2023] by around 400Mbbls/d [400,000 b/d] due to slower demand in Europe,” he said.

By Aparupa Mazumder

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