Brent inches lower as market focuses on delay in interest rate cuts

The front-month ICE Brent contract shed $0.12/bbl on the day, to trade at $84.17/bbl at 09.00 GMT.

PHOTO: An oil pump against the background of the US flag. Getty Images

Upward pressure:

Brent futures found support this week on the back of easing demand concerns in the world’s top oil consumers – China and the US.

China’s latest crude imports data for April showed a year-on-year surge of about 5% to 44.72 million mt, with daily imports standing at 10.88 million b/d, according to data from the General Administration of Customs (GACC).

Commercial crude oil inventories in the US dropped by 1.36 million bbls to 460 million bbls in the week ended 3 May, the US Energy Information Administration (EIA) reported. The stocks dropped amid higher refinery utilisation. 

“This [Brent’s] bullish momentum was reinforced by an unexpected drawdown in US oil inventories this week and upbeat trade data from China,” SPI Asset Management’s managing partner Stephen Innes remarked.

Downward pressure:

Brent’s price gains have been capped due to “higher-for-longer” interest rates, oil market analysts said.

Recent remarks from the US Federal Reserve's (Fed) officials have sparked doubts about the likelihood of a rate cut anytime soon this year. The central bank maintained interest rates at 5.25-5.50% at its two-day policy meeting earlier this month.

The US Fed is expected to maintain this stance until it becomes more confident to address the inflationary pressures.

Fed chairman Jerome Powell previously emphasised that the central bank's focus remains on achieving its 2% inflation target.

The impact of higher interest rates in the US may include a reduction in oil demand, as it elevates cost of commodities like oil for non-dollar buyers.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online