Brent gains support from China rate cut
The front-month ICE Brent contract has gained by $2.31/bbl on the day, to $75.15/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
China's central bank has reduced its short-term lending rates to stimulate economic activity, Reuters reports. This could by extension boost Chinese fuel demand as the country is making a tentative economic recovery. Weak May data on Chinese manufacturing activity and services demand has disappointed the market.
“Crude prices got a boost after China prepared a broad package of stimulus,” said OANDA’s senior market analyst Ed Moya.
The Chinese Ministry of Commerce has issued a third batch of non-state crude import quotas for this year, according to JLC. The market intelligence firm says a quota of 62.28 million mt has been issued and that the total quota for this year amounts ot 194.10 million mt - a near 9% rise on the total for 2022. China was still pursuing a zero-Covid policy for several months last year, which muted fuel demand.
The market now awaits the result of the US Federal Reserve’s Federal Open Market Committee (FOMC) meeting due later today on potential further interest rate hikes. Market analysts, including ANZ, have said a rate pause is on the cards, which could give the US economy some breathing space.
Downward pressure:
Brent futures have seen a slight downward pull after American Petroleum Institute (API) data cited by Trading Economics showed a 1.02 million-bbl build in US crude stocks in the week that ended 9 June.
“Oil also was under pressure as talk began to circulate of a big crude oil increase this week as imports were thought to be up and exports thought to be down,” commented Phil Flynn, market analyst of the Price Futures Group. The US government’s official crude oil stockpile data is due later today.
Nigeria’s crude oil production rose 19% month-on-month in May, to 1.18 million b/d. However, the country is still producing at levels below its agreed OPEC+ production quota.
By Aparupa Mazumder
Please get in touch with comments or additional info to news@engine.online
