Brent moves lower on demand growth concerns
The front-month ICE Brent contract lost $1.22/bbl on the day, to trade at $76.14/bbl at 09.00 GMT.
PHOTO: Oil pump jacks pictured at dusk. Getty Images
Upward pressure:
Brent’s price gained some upward pressure from declining crude oil stocks in the US.
Commercial crude oil inventories in the US dropped by 4.65 million bbls to 426 million bbls in the week ending 16 August – the lowest since January, the US Energy Information Administration (EIA) reported yesterday.
“[Brent] crude had a brief rally after US government data showed a significant drawdown in inventories,” SPI Asset Management’s managing partner Stephen Innes said.
Meanwhile, the recent softness in Brent’s price has prompted market analysts to bet on OPEC’s decision to keep supply cuts in place, instead of going ahead with the group’s plan to gradually unwind the ongoing 2.2 million b/d cut from October.
“It is looking increasingly likely that OPEC+ will have to delay its plans of gradually increasing supply, otherwise, expect further price weakness,” analysts from ING Bank said.
The Saudi Arabia-led oil producers’ group is scheduled to meet on 2 October to discuss its supply cut policies.
Downward pressure:
Concerns over sluggish demand growth among leading oil consumers continue to exert pressure on the price of Brent.
Brent crude’s price gains were capped as worries about the US economy grew after the US Bureau of Labor Statistics (BLS) revised the July employment report, showing a weaker-than-expected outcome.
US employers added 818,000 fewer jobs in the 12 months leading up to March 2024 than initially estimated, or a downward revision of 0.5%, Reuters reported citing data from the BLS.
This has intensified worries about US demand growth in an already volatile oil market, which is also struggling with growing concerns over Chinese demand, putting additional downward pressure on Brent’s price, analysts remarked.
“Crude trades near key support as weaker US job growth and China’s slowdown continue to weigh on prices, thereby offsetting a weekly drop in US crude and fuel stocks,” analysts from Saxo Bank said.
Several reports indicate that Israel's Prime Minister Benjamin Netanyahu has accepted Washington's latest ceasefire proposal for Gaza. This news has eased some regional supply concerns and put further downward pressure on Brent. The oil market now awaits the Hamas' response to the proposal, which could potentially bring an end to the ten-month-old conflict.
By Aparupa Mazumder
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