Brent gains as market speculates more supply risks

The front-month ICE Brent contract gained $0.42/bbl on the day, to trade at $90.07/bbl at 09.00 GMT.

PHOTO: An oil pumpjack. Getty Images

Upward pressure:

After shedding some gains at the start of the week, Brent’s price has again risen above the $90/bbl mark amid heightened geopolitical tensions in the Middle East.

Iran launched over 300 drones and missiles on Israel over the weekend. “This marks an unprecedented and dangerous development in an already volatile region,” said Jorge León, senior vice president for oil market research at Rystad Energy. 

Oil market analysts are now closely monitoring Israel’s response to the recent attack as further escalation of the Middle Eastern conflict could expose “the crude oil market to further price hikes,” remarked SPI Asset Management’s managing partner Stephen Innes.

“Oil traders are now closely scrutinizing whether the recent Iran attack represents a ‘one-and-done’ scenario, a determination that will wield significant influence over financial [oil] markets,” he added.

Brent futures also gained after China reported stronger-than-expected gross domestic product (GDP) data for the first quarter of this year. The country’s GDP grew at a rate of 5.3%, Reuters reported. Positive GDP data shows that China’s economy is growing, which in turn could boost oil demand in the country.

Downward pressure:

China’s latest crude import data has weighed on Brent futures. On a daily basis, the country imported 11.55 million b/d of crude oil in March, down around 6% from 12.32 million b/d during the same time in 2023, market intelligence provider JLC reported.

The decline in imports has sparked concerns about weakening demand growth in China, which could prompt Brent futures to lose further upward momentum.

This “lacklustre” import figure has raised questions about China’s stimulus measures and its efficiency towards a complete post-COVID economic recovery, Innes said.

Besides, OPEC has ample spare capacity that can offset supply disruptions due to a broader geopolitical conflict in the Middle East, according to analysts.

“The market is comforted by the fact that OPEC has ample spare oil capacity ready should supply be disrupted,” argued ANZ Bank’s senior commodity strategist Daniel Hynes.

By Aparupa Mazumder

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