Brent futures market closed today - here are the likely drivers for this week

The ICE Brent Futures market is closed for trading today on account of the Boxing Day holiday. Front-month ICE Brent closed at $83.92/bbl on Friday, which is $2.01/bbl higher than the price at 09:00 GMT on Friday.

PHOTO: Getty Images

Upward pressure:

The "Bomb Cyclone" winter storm - when air pressure plunges dramatically in less than 24 hours and speeds up the storm's intensity - blanketed the US and Canada with life-threatening cold conditions. CBC has reported citing the US National Weather Service, that over 240 million people across the country (70% of the population) have been under weather warnings during the holiday weekend.

The US winter warnings, coupled with supply concerns due to a massive inventory drawdown last week, the closure of the Keystone Pipeline, and depleting strategic petroleum reserves, may support Brent prices this week.

It is expected that Russian President Vladimir Putin will sign a decree halting supplies to G7 price cap participants this week. This move, combined with Russia's warning of a "5-7% output cut (500,000-700,000 b/d) in early 2023" will also boost Brent prices.

“A combination of lower Russian oil supply and OPEC+ supply cuts means that the global oil market is expected to tighten [oil market] over 2023,” writes Dutch financier ING as it forecasts Brent to average $104/bbl next year.

Downward pressure:

It is likely that as we near the end of the year, the increased calls for a recession in the US and Europe will bog down prices.

"Recession is foretold as central banks try to tame inflation," investment manager BlackRock wrote in its 2023 global outlook. According to the report, a recession will be most evident in the US and Europe, adding “the ultimate economic damage depends on how far central banks go to get inflation down.”

Added uncertainty to the price equation will be the increasing Covid cases in China, and reports of a new Covid variant, despite China's U-turn on its zero-Covid policy. It has been noted that China will remain a constant concern for the oil markets until China's economic growth and demand pick up.

By Konica Bhatt

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