Brent sheds as IEA report spurs bearish sentiment

The front-month ICE Brent contract moved $1.48/bbl lower on the day from Friday, to trade at $77.95/bbl at 09.00 GMT.

PHOTO: Oil pump jacks. Getty Images

Upward pressure:

The escalation of the Israel-Hamas conflict into a broader geopolitical confrontation has raised concerns about potential oil supply disruptions in the Middle East.

On Saturday, the US Navy took down another Houthi-controlled anti-ship ballistic missile, which was about to be launched towards the Gulf of Aden, US Central Command (CENTCOM) said.

Oil supply disruption concerns also resurfaced after an alleged Ukrainian airstrike caused a fire at a Russian fuel export terminal in the Baltic Sea. Russian energy company Novatek said on Sunday that it has suspended some operations at the terminal due to the fire.

Downward pressure:

The International Energy Agency's (IEA) projection of a slowdown in oil demand growth has reversed Brent futures previous gains. According to IEA, global oil demand is set to grow by just 1.2 million b/d this year, compared to the 2.3 million b/d growth in 2023, which has raised bearish sentiment in the market.

The Paris-headquartered energy agency attributes the drop in demand to a sluggish post-COVID recovery. “The IEA latest monthly oil market report was somewhat bearish,” ING Bank’s analysts said.

Meanwhile, the IEA expects global oil supply to grow by 1.5 million b/d this year, driven by non-OPEC+ production growth.

“The IEA sees a substantial surplus in the oil market if OPEC+ unwind their current voluntary cuts in 2Q24 [second quarter of 2024],” the analysts added.

By Aparupa Mazumder

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