Brent moves lower on weak demand projections

The front-month ICE Brent contract has lost $0.50/bbl on the day, to trade at $77.11/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Concerns over whether US President Trump could impose new taxes, tariffs and sanctions against Russia have lent some support to Brent.

The oil market’s attention will be on the US Federal Reserve’s policy meeting, market analysts said. “[The] looming tariffs could disrupt the Treasury rally… adding another layer of complexity to the Fed's calculation,” SPI Asset Management managing partner Stephen Innes said.

Market participants also await OPEC’s upcoming ministerial meeting on 3 February, where key members are expected to stick to current production levels, with the aim to support oil prices.

“The [oil] market expects OPEC to stick with its current policy, with supply curbs to continue this quarter before unwinding them from April,” ANZ Bank senior commodity strategist Daniel Hynes remarked.

Downward pressure:

Brent has moved lower as demand concerns gripped the world's top two oil consumers: the US and China.

Crude oil inventories in the US rose by about 2.9 million bbls in the week that ended 24 January, according to the American Petroleum Institute (API).

A surge in US crude stocks can indicate a drop in oil demand, which can cap Brent's price rise. “Overall prices trade a tad softer after… API reported a weekly increase in US stockpiles,” analysts from Saxo Bank said.

China's Manufacturing Purchasing Managers' Index (PMI) came in at 49.1 for January, well below market expectations.

A PMI below 50 signals a contraction in economic activity, and could reflect weaker economic health and potentially reduced demand for commodities like oil.

By Aparupa Mazumder

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