Brent shrugs off global interest rate hike concerns in early trade

The front-month ICE Brent has gained by $0.33/bbl on the day from Friday, to trade at $84.71/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Eric Nuttall, oil market investor and partner at Ninepoint Partners, has said that the US is turning a blind eye towards enforcement of sanctions on Iran to lower oil prices before the next election. However, global crude oil inventories are still expected to end 2023 at an “8+ year low, supportive of a HIGHER oil price,” he wrote in a recent social media post.

Turkish and Iraqi officials are reportedly discussing resuming oil supply from Iraq's Kurdistan-operated northern oil fields. However, neither side has provided an update on the negotiations, and they appear to be stalled.

Downward pressure:

US Federal Reserve (Fed) chair Jerome Powell and European Central Bank (ECB) president Christine Lagarde held hawkish views at the Jackson Hole summit in Wyoming that left little room for debate. They pledged to keep interest rates as high as possible for as long as it takes to keep inflation below the 2% target in the US and in the Eurozone.

Higher interest rates discourage borrowing and spending, which leads to a decline in economic activity and fuel demand.

Prospects of easing supply constraints could cap Brent’s gains.

White House officials are drafting a proposal to relax sanctions on Venezuela's oil sector, according to Reuters. The easing of sanctions would make it easier for foreign buyers to access Venezuelan oil and flood the market with excess supply. Venezuela produced around 844,000 b/d of oil in July and 2.9 million b/d during its peak production in 2015.

By Konica Bhatt

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