Brent futures backtrack on weak US retail sales and potential US crude inventory builds

Front-month ICE Brent has decreased by $2.35/bbl on the day, to $84.06/bbl at 09.00 GMT.

PHOTO: US flag on an oil refinery. Getty Images

Upward pressure:

The International Energy Agency (IEA) has raised its demand growth forecast for 2023. It now expects demand to grow by 1.9 million b/d this year to a record 101.7 million b/d, with China contributing around half of the demand rise.

The IEA’s optimistic outlook comes a day after OPEC reiterated its forecast of global oil demand rising by 2.2 million b/d to 101.8 million b/d this year.

OPEC expects Russia’s liquid fuel output to decline by 850,000 b/d to 10.1 million b/d this year amid "high uncertainty.”

Saudi Aramco's chief executive Amin Nasser has warned that there will be a global energy shortage as demand increases and spare capacity shrinks.

Downward pressure:

Brent has retreated from its multi-week high levels as weak economic data in the US has caused concern over demand, with possible US crude inventory build-ups.

“US retail sales fell more than expected in December, while total industrial production fell 0.7%. This raised the spectre of a recession, with risk appetite suffering as a consequence,” says ANZ commodity strategist Daniel Hynes.

The decline in retail sales and manufacturing activity during the holiday season implies consumers have reduced their spending, which suggests weakening demand. These are also indicators of a possible recession, adding downward pressure on Brent.

The American Petroleum Institute (API) estimates that US crude inventories grew by 7.6 million bbls in the week that ended 13 January.

The IEA has meanwhile hinted at potential oversupply of oil in the market as "slow demand recovery expected in the first half of this year suggests continued inventory builds."

By Konica Bhatt

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