Brent recovers slightly from last week's massive drop

The front-month ICE Brent contract has gained by $2.70/bbl on the day from Friday, to $76.49/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent prices have rebounded as tightening supply has once again taken center-stage. According to market analysts, OPEC+ is likely to announce further output cuts at its June in-person meeting.

“The oil fundamentals for supply are still somewhat bearish, but expectations are for OPEC+ to take care of that at next month’s meeting on output,” says Ed Moya, senior market analyst at OANDA.

The producers' group is tracking market fundamentals around the crude sector very closely, says Phil Flynn, senior account executive at The Price Futures Group. “Sources that I have spoken with believe that OPEC is only a few dollars away from another surprise production cut if this market does not recover soon.”

Another round of supply cuts by OPEC+ would further tighten oil inventories in major producing countries.

Downward pressure:

The US Congress is at a standstill over raising the debt ceiling. US Treasury Secretary Janet Yellen has warned the ceiling could be breached as early as 1 June.

The White House's economic advisors have warned of a financial crisis akin to the "great recession" of 2008 if the US defaults on its debt payments.

China’s slower-than-expected economic recovery, after the lockdowns were lifted, remains a point of concerns for traders. The uncertainty surrounding China's economy has made market nervous about the potential increase in demand that was earlier expected to drive Brent higher.

"We think that most [commodity] prices will continue to struggle over the next few months due to slowdowns in advanced economies," London-based Capital Economics said in a note to clients.

By Konica Bhatt

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