Brent recovers from lows as market attention shifts to China's oil demand

The front-month ICE Brent contract has inched up by $0.31/bbl on the day from Friday, to $81.46/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Prospects of a Chinese oil demand recovery and supply shortages from reduced OPEC+ production remain the key supports for Brent. Chinese travel and fuel demand is expected to surge during the nation's five-day Golden Week holiday, which begins on 1 May.

According to the International Energy Agency (IEA), global oil demand will reach a “record” 101.9 million b/d this year. This historic demand, fuelled by the Chinese consumption recovery and OPEC+ output cuts, will also squeeze worldwide supply and tilt the supply-demand balance into a 400,000 b/d deficit by the end of the year, the watchdog has warned.

The Iraqi and Kurdish governments have not yet reached an agreement on oil supplies from Kurdish fields located in northern Iraq. The impasse has kept around 450,000 b/d of Kurdish crude supply away from the market.

Downward pressure:

Russia emerged as India's top supplier in the last fiscal year, Reuters has reported citing industry sources, as India's imports from OPEC countries declined to the lowest level in 22 years.

This is the first time that Russia has overtaken OPEC producers Iraq and Saudi Arabia as the leading supplier to India, according to data accessed by Reuters. Russian Urals crude oil is trading at a $17/bbl discount to the Brent spot price today. 

“The recent stress in the US banking sector has heightened concerns around the growth trajectory, triggering a shift from a market heavily focused on inflation last year to growth concerns,” SPI Asset Management managing partner Stephen Innes said in a note. The US Federal Reserve's signalling of a rate hike beyond May could be negative for oil markets, he added.

By Konica Bhatt

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