Brent climbs back above $80/bbl as supply concerns amplify
The front-month ICE Brent contract moved $2.05/bbl higher on the day, to trade at $81.56/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Supply concerns in the global oil market have heightened this week, pushing Brent’s price above the $80/bbl mark.
Over the weekend, Iran-aligned Houthi militants struck two cargo vessels in the Gulf of Aden with anti-ship ballistic missiles (ASBM), US Central Command (CENTCOM) reported.
“For the oil market this is simmering geopolitical risk. It’s almost unthinkable that a small rebel group can disrupt global shipping lanes,” Price Futures Group’s senior market analyst Phil Flynn remarked.
Oil prices drew more support following the news of additional sanctions on Iran’s shipping sector, according to ANZ Bank’s senior commodity strategist Daniel Hynes.
The US Department of Treasury sanctioned ten individuals, entities, and vessels that have engaged in the illicit transport of oil and provided financial backing to militant groups including the Yemen-based Houthis.
Downward pressure:
Brent’s price gains were marginally capped by OPEC’s latest decision on production cuts. The oil producers group decided to gradually unwind the ongoing 2.2 million b/d supply cut from October 2024 until September 2025.
“Some market participants viewed OPEC+’s decision of June 2 to gradually return 2.2 million b/d of crude to the market over October 2024-September 2025 as bearish,” VANDA Insights’ founder and analyst Vandana Hari said.
Besides, the oil market will wait for the US Federal Reserve’s (Fed) interest rate decision at the two-day Federal Open Market Committee (FOMC) meeting that starts later today.
Higher interest rates can dampen global demand as they increase the cost of commodities like oil for non-dollar holders.
The US Consumer Price Index (CPI) data due later this week will also shed some light on inflation growth in the world’s largest oil-consuming nation, analysts said.
“[Oil] market focus is on the Fed's rate decision and US inflation data,” analysts from Saxo Bank wrote in a note.
By Aparupa Mazumder
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