Brent slides amid concerns about US economic slowdown

The front-month ICE Brent contract lost $0.26/bbl on the day, to trade at $83.50/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained support after Israel rejected the draft ceasefire proposal from Hamas on Monday. This news has sparked fresh concerns about supply crunch in the global oil market as analysts fear further escalation of tensions in key oil producing regions in the Middle East.

“With the Gaza ceasefire talks falling apart, as was expected, the [oil] market is starting to realize that the geopolitical risk factors have not gone away,” Price Futures Group’s senior market analyst Phil Flynn said.

Israel conducted another round of airstrikes on Gaza’s southern Rafah region yesterday, while the ceasefire talks continued in Cairo, Reuters reported.

Brent gained “on news that Israel had rejected a draft proposal accepted by Hamas and begun hitting targets in Rafah city in southern Gaza,” VANDA Insights’ founder and analyst Vandana Hari said.

Downward pressure:

Brent futures felt some downward pressure due to growing concerns about a potential deceleration in the US economy. This sentiment gained support after the US released a downbeat jobs data and a below-50 reading for manufacturing Purchasing Managers' Index (PMI). A PMI reading below 50 indicates contraction.

“Currently, the [oil] market is worried about a US economic slowdown,” SPI Asset Management’s managing partner Stephen Innes said.

Brent’s price gains will be further capped if the US Federal Reserve (Fed) delays interest rates cut for the rest of this year. The US central bank maintained interest rates at 5.25-5.50% at its latest policy meeting.

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

By Aparupa Mazumder

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