Brent steady amid counter pressures from US oil demand optimism and expected interest rate hike

The front-month ICE Brent contract has shed $0.49/bbl on the day, to $76.47/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

US oil demand was stronger than previously expected in April. The US Energy Information Administration (EIA) has revised its demand estimate for April up by 750,000 b/d to 20.42 million b/d.

“That revision means that oil demand in April was at a record high, above both April 2022 and April 2019,” said Price Futures Group’s senior market analyst Phil Flynn.

Moreover, a peak summer travel season in the US is putting upward pressure on Brent as expectations of fuel demand growth is boosting oil market sentiments.

"The crude demand outlook is starting to look better as we enter peak summer travel in the U.S." said OANDA market analyst Ed Moya.

Downward pressure:

Brent has seen some headwind from growing expectations of yet another interest rate hike by the US Federal Reserve (Fed).

Higher interest rates can lead to sluggish economic growth, which can then weigh heavily on consumer activity and put a cap on global oil demand.

The oil market is leaning towards believing there will be another hawkish hike by the Fed at its 25-26 July meeting, after the central bank kept its key interest rate unchanged in June.  

“A more hawkish Federal Reserve, robust Russian supply and rising Iranian supply all suggest that the market will not trade as high as initially expected,” said ING’s senior analyst Warren Patterson.

“It doesn’t appear as though Russia has stuck to a previous cut of 500Mbbls/d when you consider that Russian seaborne crude oil exports have been strong for most of the year,” added Patterson.

By Aparupa Mazumder 

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