Brent set for third straight weekly decline
The front-month ICE Brent contract has inched $0.48/bbl higher on the day, to $73.79/bbl at 09.00 GMT. However, futures are set for a near 10% weekly decline.
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Upward pressure:
The oil market remains hopeful, despite a worrying global macroeconomic scenario, owing to solid underlying factors surrounding Brent.
“While sentiment is negative at the moment, the market is in oversold territory and our balance sheet still shows that the market will be in deficit over 2H23 [second half of 2023], which should drive prices higher,” says ING’s head of commodity strategy Warren Patterson.
OPEC+ will hold its next in-person meeting in June. Crude market experts anticipate that the producers' coalition will announce further output cuts if Brent's price drops further against a weak macroeconomic backdrop.
A spokesperson for the Iraqi regime, Basim al-Awadi, has informed Bloomberg News that the delay in resuming crude exports from Ceyhan is because of technical issues claimed by Turkey and the readiness of the pipeline, rather than a lack of agreement between Iraqi and Kurdish authorities.
Downward pressure:
Saudi Arabia has lowered the official selling price (OSP) for all grades of crude oil imported into Asia for June. According to a Bloomberg report, the kingdom has cut the OSP for its flagship Arab Light crude by $0.25/bbl from June to $2.55/bbl premium over Oman/Dubai quotes.
While the OSP cut is lower than the $0.45/bbl reduction estimated by traders and refiners polled by Bloomberg, it indicates that the world’s biggest oil supplier expects demand to wane in the coming months.
In the US, White House economic advisors have issued an ominous warning that American debt payments may default, causing a recession akin to the 2008 "great recession."
The US, one of the world's biggest oil consumers, is already under pressure from the banking crisis and rising interest rates. A crippling recession is likely to further undermine demand and spell bad news for the Brent price, which is heavily influenced by global fundamentals.
“If equities continue to plunge here, oil might struggle finding support around the mid-$60s," says OANDA’s senior market analyst Ed Moya. "The outlook for the economy is getting uglier by the day and that is making it easier for energy traders to jump on the momentum selling that is hitting WTI [and Brent] crude.”
By Konica Bhatt
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