Brent declines as OPEC lowers its summer demand outlook

Front-month ICE Brent has slipped lower by $1.22/bbl on the day, to $86.04/bbl at 09.00 GMT.

PHOTO: US Flag on an oil refinery. Getty Images

Upward pressure:

OPEC has kept its global demand growth forecast for this year unchanged from its March outlook. The global oil demand is projected to increase by 2.3 million b/d this year to 101.9 million b/d, led by China, according to OPEC’s latest oil market report.

China imported 12.37 million b/d of crude oil in March, according to official customs data accessed by Reuters. This is the highest level in nearly three years, Reuters reports.

OPEC has lowered Russia’s oil production forecast by an additional 50,000 b/d from its March projection considering recent output cuts announced by the country. It has estimated Russian liquid fuel production to drop by 750,000 b/d to average 10.3 million b/d this year.

The US Energy Information Administration (EIA) has forecast the Brent spot price to average $85/bbl this year - an upward revision of $3/bbl from its March outlook. According to the EIA, the additional oil production cut announced by OPEC+ will tighten the oil market this year and push Brent's spot price higher.

Downward pressure:

OPEC has forecast a decline in the US and European summer oil demand in the second quarter of this year amid concerns over an economic slowdown and rising interest rates. The organisation has highlighted that "ongoing French refinery strikes" and "peak refinery maintenance in Asia" could further reduce summer oil demand.

The US Federal Reserve (Fed) released the minutes of its Federal Open Market Committee (FOMC) meeting held in March. The minutes indicate that the US economy is predicted to enter a recession later this year, partly because of headwinds from the recent banking sector turmoil. This could lower oil demand in the US.

By Konica Bhatt

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