Brent inches up after OPEC+ maintains output policy

The front-month ICE Brent contract gained $0.19/bbl on the day, to trade at $89.20/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures continued their upward trajectory following the OPEC+'s decision to maintain output policy and supply cut pledges at the group's latest Joint Ministerial Monitoring Committee (JMMC) meeting.

The coalition opted to extend supply cuts through June-end amidst the backdrop of recovering global economies, notably in the US and China.

“While this was widely expected, it provides some assurance that the recent rise in tension in the Middle East has not altered the group’s view on the market,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

In the US, manufacturing PMI surged to 50.3 in March, up from 47.8 in February, according to the Institute for Supply Management (ISM). Besides, China's manufacturing PMI climbed 1.7% month-on-month to reach 50.8 during the same period, as reported by China’s National Bureau of Statistics (NBS).

“China's tentative recovery also contributes to the ongoing surge in global commodity prices," SPI Asset Management’s managing partner Stephen Innes noted. "On Wednesday, oil prices edged closer to $90 a barrel," he added.

The global oil market is also "on edge" as tension in the Middle East escalated following an Israeli airstrike on the Iranian embassy in Syria, Hynes remarked. "Iran and local militia groups have vowed revenge," he added.

Downward pressure:

Jerome Powell, the chairman of the US Federal Reserve (Fed), stated on Wednesday that the central bank has the “luxury of time to decide when to implement its first rate cut,” Innes remarked. Powell's statement indicates that the Fed does not see inflationary pressures easing in the US in the near future.

This news has exerted downward pressure on Brent as higher interest rates make commodities like oil more expensive for non-dollar holders, thereby limiting its demand growth.

“With rate cuts still on the horizon, as confirmed by Fed Chair Powell, we believe the upside may not yet be exhausted, but anticipate some consolidation soon," noted Saxo Bank’s strategy team.

Meanwhile, a surprise increase in US crude stocks also restrained Brent's upward momentum. Commercial crude oil inventories in the US rose by 3.21 million bbls to 451 million bbls on 29 March, according to data from the US Energy Information Administration (EIA).

“The increase reported by the EIA appears to be driven by lower crude exports, which fell by 159,000 barrels per day [159,000 b/d] week-on-week, while refinery run rates were also marginally lower over the week,” stated two analysts from ING Bank.

By Tuhin Roy

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