Brent moves higher on tight supply and hopes of strong demand
The front-month ICE Brent contract has moved up by $1.00/bbl on the day, to $81.17/bbl at 09.00 GMT.
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Upward pressure:
Brent futures continued to move upward after supply disruptions occurred in Nigeria and Libya.
In Libya, production at El Feel and Sharara oil fields has been stopped since yesterday amid protests by a local tribe against the abduction of a former government official.
Meanwhile, in Nigeria, oil major Shell has suspended operations at Forcados oil terminal because of a potential leak in the facility. Both these disruptions are significant and will impact the global oil market, which is already seeing tight supply, commented ING’s market analyst Warren Patterson.
“Crude prices are getting a boost from expectations that the oil market will get very tight as Libya and Nigeria deal with disruptions, also while Russian crude exports finally decline,” said OANDA’s analyst Ed Moya.
Brent felt additional upward pressure after both the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) released their monthly oil market reports yesterday.
IEA has raised its forecast for oil demand in 2024 by 1.1 million b/d, while OPEC has projected demand to grow by 2.25 million b/d in 2024. “This is quite aggressive when considering the uncertain macro-outlook,” said Patterson.
The oil market is now hoping to see a strong oil demand in the US after a recent report by the US Labor Department suggested a slowdown in inflation.
Downward pressure:
Brent felt some downward pressure from growing uncertainties around China’s economic recovery after recurring COVID-19 outbreaks. More hawkish moves from the US Federal Reserve (Fed) can also weigh down on Brent.
Further monetary tightening measures by the US Fed could strengthen the US dollar and increase borrowing costs for non-dollar currency holders. This could have a negative impact on oil demand growth.
By Aparupa Mazumder
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