Brent moves higher as supply concerns intensify
The front-month ICE Brent contract gained $1.84/bbl on the day, to trade at $87.16/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Brent futures moved higher amid growing expectations of a robust demand growth during the summer travel season in the US. Concerns over supply disruption due to the ongoing Israel-Hamas conflict also supported oil prices.
Brent's price drew support from geopolitical risks and “the possibility of an oil supply deficit and predictions of record Fourth of July travel [4 July US Independence Day holiday],” Price Futures Group’s senior market analyst Phil Flynn remarked.
The onset of the Atlantic hurricane season has raised concerns about disruption in oil production in the Americas. Hurricane Beryl made landfall on Grenada's Carriacou Island on Monday, tearing through the Windward Islands just hours after intensifying into a powerful Category 4 storm.
“The record-breaking Hurricane Beryl is intensifying and raising the chances of flooding rains and storm surges which could hit oil operations in the Gulf of Mexico later this week,” two analysts from ING Bank said.
Downward pressure:
Brent futures felt some downward pressure following a slowdown in June’s manufacturing activity in the world's top oil consumers - China and the US.
Manufacturing Purchasing Managers' Index (PMI) reading in the US dipped to 48.5% in June, from 48.7% in May, indicating a decline in the country’s manufacturing sector.
China's manufacturing PMI remained at 49.5% in June. The latest reading shows that the factory activity in China has shrunk for a second consecutive month.
A PMI reading below 50 typically indicates weak economic health and a contraction in the manufacturing sector, which includes production, inventory levels, new orders, etc. It also highlights demand growth concerns, ultimately weighing down on prices of commodities like oil.
By Aparupa Mazumder
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