Brent loses ground as non-OPEC production rises
The front-month ICE Brent contract moved $1.72/bbl lower on the day from Friday, to trade at $85.32/bbl at 09.00 GMT.
PHOTO: Crude oil coming out of an oil barrel. Getty Images
Upward pressure:
Oil prices found some support at the beginning of this week as the US market saw a slowdown in inflationary pressures.
Inflation in the US, indicated by the change in Personal Consumption Expenditures (PCE) price index, came out flat in May, after remaining elevated at 0.3% in February, March, and April, the US Bureau of Economic Analysis (BEA) reported.
The latest reading has boosted hopes that the US Federal Reserve (Fed) could start cutting interest rates sooner-than-expected, which in turn could support demand growth in the world’s largest oil-consuming nation.
“The U.S. PCE price index remained flat in May, hinting at potential [US] rate cuts in September,” analysts from Saxo Bank said.
On a year-on-year basis, the PCE price index noted a modest decline in May at 2.6%.
Additionally, Brent’s price found support from forecasts of a supply shortage in the global oil market as OPEC+ continues to make voluntary oil output cuts in the third quarter of this year.
“With fundamentals set to tighten over the third quarter we remain constructive towards the [oil] market,” two analysts from ING Bank said.
Downward pressure:
A rise in non-OPEC crude oil production weighed on Brent futures. The US Energy Information Administration (EIA) reported on Friday that crude oil production in the country rose to a four-month high in April.
Total US crude oil field production increased by 72,000 b/d month-on-month to 13.25 million b/d in April, reaching its highest monthly level since December last year, the EIA said in its Petroleum Supply Monthly report.
Market sentiments were also tempered by a slowdown in Chinese oil demand, VANDA Insights’ founder and analyst Vandana Hari remarked. “Chinese factory activity shrank for the second month in a row in June,” she added.
By Aparupa Mazumder
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