Brent futures tick lower as the US dollar strengthens

Front-month ICE Brent has inched downwards by $0.67/bbl on the day, to $83.26/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

China is expected to import a record amount of crude oil this year, according to four oil market analysts to Reuters. Analysts estimate that China's crude imports will rise by between 500,000 and 1 million b/d, to a record 11.8 million b/d.

Meanwhile, the International Energy Agency (IEA) has predicted that China's oil demand will grow by over 900,000 b/d this year, and Goldman Sachs commodity strategists believe it will grow by an even greater 1 million b/d.

OPEC members and allies are currently underproducing against their quotas, and Russia has announced a 500,000 b/d cut in its production. The OPEC+ coalition could end up producing volumes short of global demand if China's appetite increases sharply.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman says the coalition's output decisions are determined by "technical studies of the market," according to Bloomberg. Bloomberg has quoted the minister saying, “We are flexible enough to adjust OPEC decisions if needed.”

Another factor that augurs well for Brent is that global bodies including the International Monetary Fund (IMF), World Bank and UNCTAD have raised their global economic growth forecasts, now predicting that the US and Europe will narrowly avoid recessions this year.

Downward pressure:

On the other hand, the global economy is expected to grow tepidly this year despite potentially avoiding a recession. This is likely to negatively affect oil demand in the near-term.

In addition, a strengthening US dollar has capped Brent price gains. Several economic data points last week bolstered expectations of tighter monetary policy from the US Federal Reserve, causing the US dollar to climb to a six-week high on Friday.

According to the IEA, non-OPEC+ producers are likely to fill the supply void left by Russia and OPEC. “For the year as a whole, global oil supply is forecast to expand by 1.2 million b/d, led by the US, Brazil, Norway, Canada and Guyana – all set to pump at record rates,” the IEA has said.

By Konica Bhatt

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