Brent rebounds from 15-month low

Front-month ICE Brent has rebounded by $3.19/bbl on the day, to $74.36/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has gained some ground as investors are gradually returning to interest rate-sensitive commodity futures like Brent. “Commodity traders, including Citadel and Trafigura, believe the recent banking sector turmoil is likely to be limited in duration with only minimal damage to the wider economy,” ANZ commodity strategist Daniel Hynes has said.

Iraq has lowered oil output from its southern fields to conform to OPEC+ production quotas, according to S&P Global. OPEC+ has agreed to reduce its collective output by 2 million b/d through 2023.

OPEC secretary general Haitham Al Ghais and Iraq’s Prime Minister Mohammed Shia al-Sudani have also discussed “coordinated action” to ease oil market volatility and limit adverse effects for oil importers, according to a Reuters report citing the Iraqi government.

Goldman Sachs economists expect the US Federal Reserve (Fed) to keep its interest rate unchanged at its meeting tomorrow.

Downward pressure:

Many economists are worried that the US and European economies are in precarious shape following the banking crisis and could be headed for a recession. A recession would also hurt oil demand and cause further drops in Brent's price.

Goldman Sachs has cut its Brent forecast for this year to $94/bbl, according to Reuters. This is a downward revision of $13/bbl from its earlier forecast of $107/bbl.

The uncertainty is compounded by the fact that the Fed has not made any clear policy announcements regarding the upcoming meeting. Several market observers have predicted a 25-basis point increase by the Fed tomorrow to hold down US inflation. An interest rate hike could lead to tightening credit and an economic slowdown.

By Konica Bhatt

Please get in touch with comments or additional info to news@engine.online