Brent pares previous day’s losses

The front-month ICE Brent contract has moved higher by $0.61/bbl on the day, to $76.59/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures have recovered some lost ground after the oil market turned optimistic on Chinese crude demand.

"China's economic rebound is still the focus of oil traders. More stimulus measures by the Chinese government could improve the oil demand outlook," said Tina Teng, markets analyst at CMC.

Brent has also been boosted by a weaker dollar and optimism that the global economy will remain strong throughout the summer, commented OANDA’s market analyst Edward Moya. “Oil could continue rebounding if the headlines for China remain upbeat,” he added in a note.

The market now awaits new catalysts that could drive oil prices further upwards, like the latest US inventory data from the Energy Information Administration (EIA) due later today. The EIA’s data has been delayed by a day because of the US Juneteenth public holiday.

Downward pressure:

Brent has seen some headwind from comments by the US Federal Reserve’s (Fed) chair Jerome Powell, who has indicated that further interest rate hikes are on the table to tame the stubborn inflation. Powell said that the central bank’s primary goal is to bring inflationary pressure under control and that two additional 25-basis point rate hikes this year is "a pretty good guess."

A high-interest rate will increase borrowing costs for consumers and could ultimately result in weaker global oil demand.

Earlier this week, two European Central Bank (ECB) policymakers argued in a speech that more rate hikes were required to avoid higher inflation.

“Downside risks to global growth remain a key overhang for the oil demand outlook...risk sentiments are on hold ahead of a series of hawkish Fedspeak lined up on the calendar,” said Jun Rong Yeap, a market strategist at IG Group.

By Aparupa Mazumder 

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