Brent sheds previous day’s gains

The front-month ICE Brent contract has dropped by $2.64/bbl on the day, to $71.82/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures drew some support after data from the American Petroleum Institute (API) showed a larger-than-expected drawdown in US oil inventories last week, indicating demand growth, Reuters reports.

Strong demand from the world’s biggest oil consumers during the summer driving season is expected to keep Brent price stable.

Besides, Saudi Arabia’s pledge to cut oil output by another 1 million b/d will come into force from July. This could add to the global supply crunch and support oil prices.

“We continue to expect the market to tighten in second-half 2023 on the back of Saudi supply cuts effective from July with upside risk to prices from current levels," said analysts at the National Australia Bank commodity research team.

Downward pressure:

Brent shed previous gains as private mercenary group Wagner retreated from a potential coup in Russia on Saturday. The domestic mutiny had raised concerns about political instability in Russia.

The aversion of coup has shifted oil investors' focus on "gloomy economic forecast and global central bankers that still want a recession," said Phil Flynn, Price Futures Group’s senior market analyst.

Interest rate hikes in several countries have put a downward pressure on Brent. Nations like the UK, Switzerland, and Norway imposed another hike in interest rates last week, and US Federal Reserve’s (Fed) chairman Jerome Powell signaled yet another rate hike this year.

“Inflation is stubbornly high in Europe that could trigger a lot more rate hikes and a harsher recession,” OANDA’s market analyst Ed Moya said in a note.

By Aparupa Mazumder 

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