Brent falls further amid signs of easing demand

The front-month ICE Brent contract moved $0.23/bbl lower on the day, to trade at $82.55/bbl at 09.00 GMT.

PHOTO: Crude oil barrels. Getty Images

Upward pressure:

Geopolitical developments remain a key focus area for the global oil market.

Russian officials confirmed that Ukraine launched a barrage of drones on Monday, one of which crashed into the Tuapse oil refinery in Russia’s Krasnodar region and caused a fire.

The refinery is owned by Russia’s biggest oil producer Rosneft and has a nameplate capacity of about 240,000 b/d, Reuters reports. It has been attacked several times since the Russia-Ukraine war started in 2022.

“The prospect of renewed supply disruptions also helped contain the losses in the oil market,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Authorities in Canada ordered an evacuation in the town of Jasper and Jasper National Park in Alberta, Canada, as wildfires continued. “Very large wildfires in Alberta, Canada, are within 10km of more than 380kb/d [380,000 b/d] of production,” Hynes added.

The oil market is poised to remain tight through the third quarter of this year due to oil production cuts from OPEC+ member nations, according to analysts. OPEC+ cuts “should ensure that the market tightens in the current quarter,” two analysts from ING Bank remarked.

The oil producers’ group will meet next in August to discuss output policies.

Downward pressure:

Brent’s price came under pressure as oil investors assessed the potential impact of US President Joe Biden's decision to drop out of the upcoming presidential elections. This has increased the bets on the victory of the Republican candidate Donald Trump. Notably, during his first term as the US President, the country's oil industry got extensive federal support to increase oil production.

“[Oil] traders anticipated a potential victory for Donald Trump, who is expected to boost US crude production, potentially leading to lower prices in the long term,” analysts from Saxo Bank said.

Oil demand growth is also easing as the initial boost from the summer travel season has subsided. This has added some downward pressure on Brent’s price.  

"The complex needs fresh cues for prices to take a decisive leap higher or lower but with the market slipping into a summer lull, the weekly US stocks data is the only event on the horizon to impact sentiment," VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder

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