Brent gains on hopes of growing oil demand in the US

The front-month ICE Brent contract has increased by $1.27/bbl on the day from Friday, to $77.74/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained upward support as the latest report from the US Energy Information Administration (EIA) showed an increase in the country's oil demand.

According to the EIA data, US oil demand averaged 20.7 million b/d in the four-week period ending 30 June, up by 3.5% from the same period last year.

“It appears that the mood is shifting as the pessimism about demand is starting to meet with reality that it continues to grow,” said Price Futures Group’s senior market analyst Phil Flynn.

“The market is starting to realize that even after the most aggressive rate cycle increase ever that the impact on oil demand is not as pronounced as some have predicted,” Flynn said in a note.

This week, oil markets will focus on demand forecasts by the International Energy Agency (IEA) and OPEC. Both are due to release their oil market reports later this week.

Downward pressure:

Brent has felt some downward pressure in recent weeks due to weaker-than-expected economic growth in China, after the country lifted all COVID-related restrictions.

The oil market is now waiting for fresh cues from the world's top oil consumers the US and China.

“Big macro release this week will be US CPI numbers on Wednesday, which will likely further shape market expectations on how much more monetary tightening we could see from the US Federal Reserve in the months ahead,” said ING’s market analyst Warren Patterson.

Last month, the US Federal Reserve's (Fed) chairman Jerome Powell said that further rate hikes in the US by the end of 2023 is a “pretty good guess”.

Higher interest rates can escalate borrowing costs for consumers and have a negative impact on the economy, ultimately affecting global oil demand growth.

By Aparupa Mazumder 

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