Brent gains following supply concerns arising from the Middle East

The front-month ICE Brent contract moved $0.61/bbl higher on the day from Friday, to trade at $84.01/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Concerns about disruptions in oil supply in the Middle East escalated amid growing fears of political instability in Iran.

Brent futures moved higher following the news of Iran’s President Ebrahim Raisi’s death in a helicopter crash on Sunday. This news has sparked fear about a broader geopolitical ramification in the global oil market and supported Brent.

In the latest series of attacks Iran-backed Houthi forces struck M/T Wind, a Panamanian-flagged, Greek-owned and operated oil tanker with a missile on 18 May, US Central Command reported. The oil tanker was most recently docked in Russia and headed for China.

“The risk of supply disruptions will be on the agenda when OPEC meets in two weeks,” ANZ Bank’s senior commodity strategist Daniel Hynes wrote. “We expect the [OPEC+] group to extend the 2.2 million b/d voluntary cuts until the end of the year,” he added.

The Saudi Arabia-led coalition is expected to meet in June to discuss oil output policies, but the official date of the ministerial meeting has not been announced.

Downward pressure:

Prospects of rising non-OPEC oil supply combined with a potential slowdown in demand have capped sharp gains in Brent’s price.

The International Energy Agency (IEA) has revised downward its 2024 forecast for global oil demand. It now expects world oil demand to grow by 1.1 million b/d in 2024, a decrease of 140,000 b/d from its earlier estimate.

The IEA expects global oil output to grow by 580,000 b/d to 102.7 million b/d in 2024, with non-OPEC countries including the US, Guyana, Brazil, and Canada leading the production.

By Aparupa Mazumder

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