Brent moves higher on growing supply concerns

The front-month ICE Brent contract has gained $0.87/bbl on the day from Friday, to trade at $73.21/bbl at 09.00 GMT.

PHOTO: An oil barrel. Getty Images

Upward pressure:

Brent’s price shed the previous week’s losses to move upward after strong economic data from the world’s largest oil consumer, the US, supported oil demand growth expectations.

US consumer spending increased last month amid strong demand growth for a range of goods and services, Reuters reported. The news has boosted the market’s confidence in the US economy and supported oil prices.

Meanwhile, supply concerns have crept back into the market following some “provocative” comments from the incoming US President Donald Trump.

According to market analysts, the US President-elect’s latest comments have heightened the chances of more sanctions on Iranian oil and petroleum products being implemented once Trump resumes office next year.  

“Renewed attention to oil supply concerns on the back of a stream of provocative comments from US President-elect Donald Trump on international trade matters over the weekend maintained a spotlight on a potential tightening of Iran oil sanctions when he takes office on January 20, crimping the Islamic Republic’s supply,” VANDA Insights’ founder and analyst Vandana Hari said.

Downward pressure:

The recent strengthening of the US dollar has put some downward pressure on Brent’s price.

A stronger dollar increases the cost of dollar-denominated commodities like oil for holders of other currencies. It can also dampen global oil demand as oil becomes more expensive for holders of other currencies, potentially leading to lower oil prices.

“Broader market concerns have weighed on the [commodity] complex, while a stronger dollar has also added further pressure [on oil prices],” two analysts from ING Bank said.

By Aparupa Mazumder

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