Brent drops over 4% as macroeconomic jitters persist

The front-month ICE Brent contract has plunged lower by $3.27/bbl on the day, to $77.99/bbl at 09.00 GMT.

PHOTO: An oil barrel against a chart. Getty Images

Upward pressure:

The market is banking on a recovery in Chinese oil demand during the Golden Week holidays, when tens of millions travel for family reunions. This is expected to push crude prices higher.

A sharp rise in demand and OPEC+ production cuts will further tighten oil supplies, which are already constrained by the standoff between Iraq and Kurdistan and by lower US crude inventories.

Commercial US crude inventories declined by 5.05 million bbls on the week, to 460.91 million bbls as of 21 April, according to official weekly figures from the US Energy Information Administration (EIA). The pullout is marginally below the 6.1 million-bbl draw estimated by the American Petroleum Institute (API), but far exceeds the 1.5 million-bbl drop predicted in a Reuters' poll of analysts.

Downward pressure:

Fears that a banking crisis could flare up amid a looming recession in the US forced Brent prices to tumble to a one-month low, below the crucial $80/bbl mark.

OANDA's senior market analyst Ed Moya has ruled out $100/bbl level for Brent in the near future as he believes "China's recovery is not materialising, and US demand is weaker."

Brent is also holding its breath in light of multiple central bank policy meetings next week.

The US Federal Reserve and the European Central Bank (ECB) are expected to signal a pause in interest rate hikes when they meet next week. However, investors are worried that any further increase will harm economies already battling macroeconomic headwinds.

By Konica Bhatt

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