Brent Crude prices at over 5-month highs

Geopolitical unrest and supply concerns propel Oil prices

By Ahmed Azzam | @3zzamous | 2 April 2024

Market close
  • Brent > $88, peaks since Oct.

  • Pemex cuts exports, tightens supply.

  • US, China PMIs signal demand recovery.

  • Possible yen intervention at 153.

Amid escalating geopolitical tensions and supply constraints, Brent crude futures soared, reaching levels above $88 a barrel on Tuesday, a height unseen since the previous October. The uptick in oil prices comes on the back of an airstrike targeting Iran's embassy in Syria, which led to the tragic loss of Iran's top commander among others, further straining Middle East relations.

Furthermore, the decision by Pemex, the Mexican state-controlled oil giant, to reduce crude exports in the forthcoming months has exacerbated concerns over already tight global oil supplies. The market eagerly anticipates the outcome of OPEC's joint ministerial meeting scheduled later this week, where members will evaluate market dynamics and compliance with production quotas. It is widely expected that the cartel will maintain its current production stance.

Demand prospects brighten

Enhanced manufacturing activity in the US and China signals a potential rebound in oil demand, underpinned by stronger-than-anticipated Purchasing Managers' Index (PMI) data from both economic powerhouses.

Yen intervention looms

Japan's currency authorities remain on alert, poised to intervene in the foreign exchange market to stabilize the yen, should it weaken further. Market speculation suggests that intervention could be triggered if the yen depreciates to 153 against the dollar, aiming for a significant correction.

US economic Indicators

Upcoming economic reports, including the JOLTS job openings for February and factory orders, are poised to shed light on the US economy's health. Early projections hint at a decrease in job openings and a potential 1% rise in factory orders, following a previous decline. These indicators, coupled with robust manufacturing performance, suggest that the persistent inverted yield curve in the bond market may soon rectify, signaling a resilient US economy.