Strong US economic data continue to drive Brent higher

The front-month ICE Brent contract gained $0.52/bbl on the day, to trade at $83.40/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent futures remained well-supported after the second consecutive weekly decline in US crude inventories. Commercial crude oil inventories in the US dropped by 2.51 million bbls to 457 million bbls in the week that ended 10 May, according to the US Energy Information Administration (EIA).

A slowdown in US inflation provided additional support to Brent's price. The US Consumer Price Index (CPI), a key indicator to determine inflationary pressures, showed a slower-than-expected growth rate of 0.3% in April.

This news eased oil demand concerns as further growth in inflation could prompt the US Federal Reserve (Fed) to keep interest rates elevated for longer, which in turn could make commodities like oil costlier for non-dollar holders.

“US economic sentiment, buoyed by investors pencilling in two interest rate cuts by the Federal Reserve this year following softer April inflation data, remained centre-stage for the oil complex,” VANDA Insights’ founder and analyst Vandana Hari said.

Downward pressure:

A bearish demand growth projection reported by the International Energy Agency (IEA) capped some of Brent’s price gains.

The Paris-based energy agency sees a major decline in global oil demand growth from 2.3 million b/d in 2023 to 1.1 million b/d this year. This is about 140,000 b/d lower than its last month’s projection.

“Concerns about weaker demand growth forecasts from organisations such as the International Energy Agency,” have continued to add some downward pressure on Brent futures, analysts from Saxo Bank remarked.

By Aparupa Mazumder

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