Brent trades in narrow range as market digests China’s growth target
Front-month ICE Brent has moved upwards by $0.51/bbl on the day from Friday, to $85.21/bbl at 09.00 GMT.
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Upward pressure:
Reports claiming that the UAE plans to leave OPEC are "far from the truth," two sources with direct knowledge of the situation have told Reuters. Brent declined last week after a media report suggested the UAE may leave OPEC over growing differences with Saudi Arabia. The UAE is one of the biggest oil producers in the OPEC group, and its departure would reduce the group's oil production and weaken its pricing power.
Saudi Arabia has raised the official selling price for its flagship Arab Light crude oil for a second consecutive month, according to Reuters. “The price hike came as several new refineries will soon come online, which would lead to supply tightness, especially considering Saudi's production of Arab Heavy is smaller than other crudes,” Reuters reports, citing an oil trader in Singapore.
“The oil market is starting to look tight again as China’s economy rebounds and over the resilience of the US service sector. Rig counts according to Baker Hughes also declined by 8 to 592,” said Edward Moya, senior market analyst at OANDA.
Downward pressure:
China has announced an annual gross domestic product (GDP) growth target of “around 5%” for this year, according to China’s state news agency Xinhua. That is lower than the country's GDP growth target of 5.5% last year, when its economy grew by just 3.5%.
A CNBC economist survey has estimated China's GDP to grow by an average of 5.24% this year.
“… suppose China's policy measures do not fire on all cylinders. In that case, oil markets could return to being held hostage by the Fed's hawkish narrative. Hence, misaligned macro drivers (Strong China vs Hawkish Fed) would continue to hold oil markets in check,” wrote SPI Asset Management’s managing partner Stephen Innes in a blog on Friday.
By Konica Bhatt
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