Brent futures rangebound as weak US data offsets supply tightening concerns

Front-month ICE Brent has inched $0.05/bbl lower on the day, to $84.71/bbl at 09.00 GMT. The Brent futures contract is set to rise over 6% since last Friday to date.

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Upward pressure:

ANZ commodity strategist Daniel Hynes has estimated that OPEC+’s surprise output cut “has the potential to push the implied oil market deficit as deep as 2mb/d [2 million b/d] in coming months.” He adds that sluggish supply growth in the US and limited spare capacity with some suppliers will shore up oil prices in the near future.

ING's head of commodity strategy Warren Patterson echoes Hynes' comments about potential supply shortage in the oil market. ING has also raised its Brent price forecast to $100/bbl in the second half of 2023 from $97/bbl earlier.

Saudi Arabia has hiked the official selling price (OSP) for May Arab Light crude by 30 cents/bbl from April. According to Reuters, the OSP is now $2.80/bbl over Oman/Dubai quotes. The hike in OSP “points to further strength in demand in the region,” Hynes says in a note.

Downward pressure:

The initial shock of OPEC+'s unexpected output cut has been mitigated by a drop in US job openings. A decline in job openings indicates that the rate of job growth is slowing down. This can be an early indicator of a weakening economy and highlights the possibility of a recession in the US.

Commercial US crude inventories declined by 3.74 million bbls on the week, to 469.96 million bbls on 31 March, according to the official weekly figures from the US Energy Information Administration (EIA). However, the decline was lower than the 4.3 million-bbl draw estimated by the American Petroleum Institute (API).

By Konica Bhatt

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