Brent falls further ahead of OPEC+ meeting

The front-month ICE Brent contract has dipped further by $2.64/bbl on the day, to $72.95/bbl at 09.00 GMT.

PHOTO: Oil barrels and a pump jack against the OPEC flag. Getty Images

Upward pressure:

Oil markets continue to react to mixed signals from producing nations on another round of output cuts from OPEC+, ahead of the group’s meeting on 4 June.

However, the Russian Deputy Prime Minister has played down the possibility of another production cut.

“It seems Novak’s words have carried more weight in the markets as traders determined that no alignment of thought will mean no deal. That may prove a little naive given the sway that Saudi Arabia holds,” OANDA’s market analyst Craig Erlam said.

On the other hand, the US oil and gas rig count has gone down by 44 this month, the biggest drop since 2020, after energy firms in the US cut rigs for a fourth consecutive week, according to Baker Hughes report.

“The falling rig count in the US suggests that US oil production may have already peaked,” said Phil Flynn, senior account executive of The Price Futures Group.

Downward pressure:

The world’s largest oil importer, China has released a weaker-than-expected economic data, provoking oil markets to worry about a lag in demand recovery.

China’s official manufacturing purchasing managers’ index (PMI) dropped to 48.8 this month, down from 49.2 in April. A reading below 50 indicates contraction.

"The current pessimism surrounding China's commodity (oil) demand stands in contrast to the optimism at the beginning of this year," said Vivek Dhar, director of commodities research at the Commonwealth Bank of Australia.

Additionally, concerns about a second COVID wave in China and a potential increase in interest rate by the US Federal Reserve continue to weigh on Brent futures.

By Aparupa Mazumder 

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