Brent pulled further down ahead of US inflation data and Fed rate decision

The front-month ICE Brent contract has inched lower by a slight $0.26/bbl on the day, to $72.84/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

China’s official trade data released earlier this month showed that crude oil imports into the world’s largest oil-consuming nation rose by 16% from April to 51 million mt in May, and lent Brent some support.

Azerbaijan’s crude production dropped to a three-year low of 500,000 b/d in May, which was below the monthly target set by OPEC+. The country’s monthly output has been falling since November 2022.

The OPEC+ output cuts announced a week ago have contributed to put a floor under Brent. Saudi Arabia will slash its output by 1 million b/d to 9 million b/d from next month, while the UAE will produce 200,000 b/d more. The OPEC+ also committed to an additional 1.4 million b/d in output cuts from January next year.

The oil market also awaits demand outlooks from OPEC due later today, and from the International Energy Agency (IEA) tomorrow.

Downward pressure:

Brent has added to Monday’s decline as investors remain cautious before the US Federal Reserve's (Fed) monetary policy meeting scheduled for 14-15 June. Markets also await US inflation data that will be released later today.

Previous monetary tightening measures taken by the Fed have bolstered the value of the US dollar, resulting in higher costs for non-dollar currencies when purchasing commodities denominated in dollars, which has added downward pressure on Brent.

Goldman Sachs has lowered its oil price forecast, now expecting Brent to reach $86/bbl by December, down from $95/bbl in its previous forecast. The bank cited higher Russian and Iranian supply to drive prices lower despite Saudi Arabia’s July output cut.

“Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” Goldman’s analysts said in a note that was reported by Bloomberg. 

By Aparupa Mazumder 

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