Brent under pressure due to surging USD
The front-month ICE Brent contract has plunged by $2.02/bbl on the day, to trade at $71.97/bbl at 09.00 GMT.
PHOTO: An oil pump jack against the US dollar and Chinese yuan. Getty Images
Upward pressure:
Brent’s price has found modest support from optimism spiked by OPEC’s decision to delay production hikes by another month. Besides, rising tensions in the Middle East have fuelled supply concerns.
“[Oil] investors were buoyed by OPEC’s decision to push back an anticipated production hike amid a flare up in the Middle East conflict,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
OPEC will meet on 1 December to discuss oil supply quotas and production policy for the upcoming year. Brent’s price is expected to move higher if the coalition decides to extend supply cuts in 2025.
Market participants are currently awaiting monthly oil market report from the Vienna-headquartered oil producers’ group, among other reports, which will be out later today.
“There is the potential for further demand revisions from the group (OPEC),” two analysts from ING Bank said. Last month, OPEC cut its demand growth forecast by 110,000 b/d for 2024. However, the Saudi Arabia-led group still estimates demand to grow by 1.9 million b/d this year and 1.7 million b/d next year, “which is still very aggressive compared to other demand [growth] estimates, which are nearer 1m b/d [1 million b/d],” the analysts added.
Downward pressure:
Brent’s price extended losses due to strengthening of the US dollar against other currencies. A firm USD can dampen oil demand by making dollar-denominated commodities like oil costlier for non-dollar buyers.
“USD strength - an ongoing theme since the US election - has provided strong headwinds not just to the oil market but also to the broader commodities complex,” ING Bank’s analysts said.
Concerns over oil demand growth in China also kept Brent futures under pressure. The latest stimulus package announced by Chinese officials is not enough to stir demand growth, according to market analysts.
“Adding to the bearish mood were fresh concerns about demand from China,” SPI Asset Management’s managing partner Stephen Innes said.
Besides, market participants will also see if OPEC lowers demand growth in its upcoming monthly oil market report.
“Any downgrades in demand—especially from OPEC—could send Brent oil prices tumbling toward the $70 mark,” Innes said.
By Aparupa Mazumder
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