Brent edges lower on demand growth concerns

The front-month ICE Brent contract has shed $0.29/bbl on the day from Friday, to trade at $74.41/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent’s price gained support following a major escalation of conflict in the Middle East, as Iran-aligned Hezbollah armed group launched airstrikes over northern Israel on Sunday.

The attack comes amid retaliation from the Lebanon-based militants after prominent leaders of the group were “eliminated” last week, the Israel Defense Forces (IDF) said on the social media platform X (formerly Twitter).

Tensions between Israel and Lebanon have further sparked concerns that the conflict could escalate and draw in Iran, a key oil producer in the region.

“Escalating tensions in the Middle East bring back risk premium in the oil market,” two analysts from ING Bank remarked.

Downward pressure:

Brent’s price saw a marginal decline due to ongoing demand growth concerns, despite China, the world’s second-largest oil consumer, introducing a stimulus measure to boost liquidity in the country’s economy, analysts said.

China's central bank injected 234.6 billion yuan ($33.29 billion) into the country's banking system, according to a Reuters report.

Despite this development, oil market investors are concerned about demand growth in China and are waiting for fresh cues from the Chinese Manufacturing Purchasing Managers' Index (PMI) reading.

“Demand concerns remain,” ING Bank’s analysts noted.

A PMI reading below 50 typically indicates weak economic health and a contraction in the manufacturing sector, which includes production, inventory levels, new orders, etc. It also highlights demand growth concerns, ultimately weighing down on prices of commodities like oil.

By Aparupa Mazumder

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