Brent loses on oversupply concerns

The front-month ICE Brent contract has lost by $0.53/bbl on the day from Friday, to trade at $67.84/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

The global market’s attention is now shifting from geopolitical tensions in the Middle East to demand growth factors. This has supported Brent crude’s price recently.

The US Federal Reserve (Fed) will hold its upcoming interest rate meeting in July, where officials are largely expected to cut US interest rates in September, according to market analysts.

Lower interest rates in the US can boost demand, making dollar-denominated commodities like oil cheaper for holders of other currencies.

“The [oil] market is punch drunk on rate cut euphoria. Futures are fully loaded for a September cut and even pricing a 20% chance for July,” SPI Asset Management managing partner Stephen Innes remarked.

Downward pressure:

Oil’s brief rally has lost momentum as supply glut concerns have overshadowed optimism about demand growth.

The eight OPEC+ members currently unwinding supply cuts are expected to raise their combined output in August by another 411,000 b/d, Reuters reports. This news has put downward pressure on Brent.

“What’s really spooking the tape now is OPEC+ playing offense,” Innes remarked.

The Saudi Arabia-led group will again meet on 6 July to decide August production levels, the group said earlier.

“Rumours are swirling that the cartel is eyeing another 411,000 bpd hike for August, which would make it four straight months of aggressive taps-turning,” Innes added.

By Aparupa Mazumder

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