Brent moves lower on growing oil demand woes
The front-month ICE Brent contract lost $1.71/bbl on the day from Friday, to trade at $81.20/bbl at 09.00 GMT.
PHOTO: A crude oil tanker discharging crude oil into storage tanks. Getty Images
Upward pressure:
The global oil market is experiencing uncertainty regarding crude supply due to OPEC+ voluntary cuts and ongoing geopolitical conflicts.
Brent’s price found some support after another US-flagged and -owned oil tanker M/V Torm Thor came under two subsequent drone attacks by the Houthis on Saturday, the US Central Command (CENTCOM) confirmed.
“Unsurprisingly, Crude oil [Brent] prices have ground upwards since the start of the year, primarily due to the daily Houthi attacks in the Red Sea shipping lanes,” SPI Asset Management’s managing partner Stephen Innes said.
The Israel-Hamas conflict does not seem to come to an end anytime soon, mainly after Israeli Prime Minister Benjamin Netanyahu said that no sides have yet struck a ceasefire deal, Reuters reported.
“The uptick in the geopolitical risk premium from a thickening Israel-Hamas conflict has likely added a few dollars to current [Brent] prices,” Innes added.
Downward pressure:
Growing US crude inventories have raised alarm bells about lackluster oil demand in the world’s largest crude oil consuming nation and capped Brent’s price gains.
US commercial crude oil stocks increased by 4 million bbls last week to reach 442.96 million bbls, according to the US Energy Information Administration (EIA).
Meanwhile, various other factors including “sluggish economic conditions and increasing electric vehicle (E.V.) sales in China, which remains a significant driver of new incremental demand,” have also weighed on oil demand and put downward pressure on Brent futures, Innes said.
The International Energy Agency (IEA) suggests that global oil demand will increase by 1.2 million b/d to reach 103 million b/d in 2024. This growth rate is much lower than the 2.2 million b/d projection observed by OPEC.
“OPEC's forecast of a 2.2 mb/d increase appears overly optimistic even if the Fed and ECB cut rates sooner than expected,” Innes added.
By Aparupa Mazumder
Please get in touch with comments or additional info to news@engine.online
