Brent gains as market focuses on OPEC+ compliance pledge

The front-month ICE Brent contract inched $0.32/bbl higher on the day from Friday, to trade at $82.80/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent futures moved higher as oil market participants focused on OPEC+ members' pledge to comply with the group’s production quotas this year.

Russia and Kazakhstan said it plans to strictly comply with the designated production levels in June. Both countries will submit compensation plans for extra oil produced in April and May to the OPEC secretariat by the end of this month.

“Stricter adherence to quotas could see non-compliant members reduce output in coming months,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Besides, Brent’s price gained after OPEC’s de-facto leader Saudi Arabia reassured the oil market that it could stop or reverse its plan to increase oil output from the fourth quarter of this year, depending on the market conditions.

Downward pressure:

Some of Brent’s price gains were capped after the latest data from China’s National Bureau of Statistics (NBS) showed that crude oil refinery output in China fell 1.8% year-on-year in May. This decline was primarily due to the refineries' planned and unplanned maintenance work.

“The oil market traded under pressure in the early trading session today on the back of weaker-than-expected industrial production data and slower refining activity in China,” two analysts from ING Bank said.

A stronger US dollar against all major currencies “amid a hawkish tone from the Federal Reserve [Fed]” added further downward pressure on Brent, according to ING analysts.

Demand growth for dollar-denominated commodities like oil can come under pressure due to the strengthening of the US dollar.

By Aparupa Mazumder

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