Brent sheds more on demand growth concerns

The front-month ICE Brent contract lost $1.02/bbl on the day, to trade at $82.04/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Oil prices gained support following the news about the Iranian President’s death in a helicopter crash on Sunday. The news raised concerns about political stability in the oil rich country.

“In Iran, Supreme Leader Ayatollah Ali Khamenei named first Vice President Mohammad Mokhber as interim president following the death of President Ebrahim Raisi,” VANDA Insights’ founder and analyst Vandana Hari said.

Ukraine’s targeted drone attacks on two Russian energy facilities have prompted state-owned company Rosneft to shut operations at its Tuapse refinery in Krasnodar region over the weekend, the country’s defense ministry said.

Iran and Russia are OPEC+’s two leading oil producers and any further supply disruptions in the region can put the global oil market in a serious deficit, according to analysts. “The market waits for clarity from OPEC+ on its output policy,” two analysts from ING Bank said. The group is expected to convene early next month.

Downward pressure:

Brent’s price gains were capped as the global oil market grew wary of a slowdown in oil demand growth in the world’s largest oil consumer – the US.

Crude oil inventories in the US gained 2.48 million bbls in the week ended 17 May, according to the American Petroleum Institute (API) estimates, as opposed to market expectation of a 3.1-million-bbl draw.

A rise in US crude stocks is often considered a negative indicator of demand growth.

“[Brent] Crude oil trades lower for a third day amid softness in the physical market and after the API reported increases in crude and gasoline stocks,” analysts from Saxo Bank’s strategy team said.

The market’s narrative of ‘higher-for-longer’ interest rates this year strengthened after bearish remarks from the US Federal Reserve 's (Fed) officials.

“It does seem clear the [Fed] Committee remains biased to cut rates, but any policy easing will be determined by how inflation develops over the next few months,” Jordan Jackson, global market strategist at J.P. Morgan said.

Higher interest rates can dampen oil demand by increasing the cost of dollar-denominated commodities like oil for non-dollar holders.

By Aparupa Mazumder

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