Brent rises as geopolitical risks rekindle oil supply concerns
The front-month ICE Brent contract gained $0.36/bbl on the day, to trade at $90.80/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
Brent futures gained as some fresh developments in the Middle Eastern conflict have reignited concerns about supply tightness in the global oil market.
Negotiators from the US introduced a new six-week ceasefire proposal and a hostage exchange deal in Egypt, but "there was no progress in the first day of renewed negotiations in Cairo yesterday," VANDA Insights' founder and market analyst Vandana Hari noted.
On Sunday, Iran-aligned Houthi forces launched ballistic anti-ship missiles towards a Marshall Islands-flagged, UK-owned and Italian-operated cargo vessel, according to the US Central Command (CENTCOM). This incident in the Red Sea has further heightened supply concerns in the global oil market, prompting Brent futures to trade higher.
“To say the market is on edge is an understatement as supply tightness is clear as we continue to see ongoing threats to supply,” Price Futures Group’s senior market analyst Phil Flynn commented.
Brent futures also received support from signs of “robust demand” after Saudi Arabia’s state-owned oil giant Aramco raised its official selling price (OSP) in Asia for May by $2/bbl, as noted by Saxo Bank’s strategy team.
Downward movement:
Brent’s gains were capped following reports that indicated Israel was withdrawing some of its troops from southern Gaza ahead of the Muslim religious holiday of Eid al-Fitr.
“Israeli officials also suggested that progress has been made on talks for a ceasefire that would include the release of hostages and Palestinian prisoners,” ANZ Bank’s senior commodity strategist Daniel Hynes stated.
US job growth exceeded expectations in March, indicating a sound economic recovery in the first quarter of the year. The US Labour Department reported last week that the unemployment rate in the country fell to 3.8% in March from 3.9% in February, Reuters reported. This has raised concerns in the oil market that the US Federal Reserve (Fed) might postpone interest rate cuts this year amid strong economic data.
“The [US unemployment rate] release has pushed back expectations on when the Federal Reserve will start to cut rates,” said two analysts from ING Bank. Higher interest rates could hinder global demand as they make commodities like oil more expensive for non-dollar holders.
Oil market analysts are awaiting the release of March US Consumer Price Index (CPI) figures scheduled for tomorrow, “which may provide some further signals on the path the Fed could take,” ING Bank's analysts said.
By Tuhin Roy
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