Brent slips on mounting oversupply fears

The front-month ICE Brent contract has declined by $1.31/bbl on the day, to trade at $62.30/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

The US Federal Reserve’s (Fed) ongoing two-day policy meeting has drawn market attention and put some upward pressure on Brent crude’s price today.

Oil market analysts are pricing in an 87% probability of a 0.25% cut in US interest rates, Reuters reported.

Lower US interest rates typically boost demand by making dollar-denominated commodities like oil more affordable for non-dollar holders, potentially offering some upside support to prices.

“The Fed’s preferred inflation gauge is finally coming through the pipe,” SPI Asset Management partner Stephen Innes said, adding that the oil market still expects another rate cut for this year.

The US central bank will conclude this year’s final Federal Open Market Committee (FOMC) meeting tomorrow.

Downward pressure:

Brent futures have come under downward pressure following the resumption of crude flows at Russian oil company Lukoil’s West Qurna-2 oilfield in Iraq yesterday, Reuters reported.

A leak prompted a temporary shutdown at the 460,000 b/d oilfield, though repairs were completed the same day.

Besides, oil prices came under pressure amid ongoing talks in the Russia-Ukraine peace deal.

Ukraine will share a revised ceasefire plan with Washington after holding talks in London between President Volodymyr Zelensky and other leaders from France, Germany and the UK, Reuters reported.

“[Oil market] traders wait for more clarity on a peace deal between Russia and Ukraine,” remarked ANZ Bank’s senior commodity strategist Daniel Hynes.

Analysts claim that a ceasefire could relax Western sanctions on Russian energy, bringing additional barrels to the global market.

“The outcome of current negotiations could have a big impact on the oil market,” Hynes added.

By Aparupa Mazumder

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