Will near-term price volatility push Brent below $70?

Oil price volatility will continue in near term with Brent likely to fall below $70 if the ongoing spat between the US and China ratchets up.

By 11:45 am Riyadh local time, Brent was trading down 52 cents (-0.7%) at $70.72 a barrel, while WTI lost 64 cents (-1%) at $61.14 a barrel after it was reported that US crude stockpiles were up.

Brent fell to below $70 a barrel on May 8, after rallying about 40 percent higher since the beginning of the year.

“Volatility in oil prices is set to continue in the near term, which could see the front-month futures price in Brent crude falling below $70 a barrel. This could particularly be the case if the trade war between the United States and China ratchets up, prompting demand-side concerns,” Abhishek Kumar, head of analytics, Interfax Energy, told Argaam.

But on the flip side, there are several factors supportive of oil prices.

In its latest monthly report, the Paris-based International Energy Agency (IEA) said that while geopolitics and industry disruptions were clouding the outlook as it believed that the market balance is set to flip from surplus into deficit, a development that would favor the oil producing nations to keep prices high.

Kumar noted the ongoing over-compliance of the OPEC+ group with its output-cut target, together with sharply falling oil production from Iran and Venezuela, will remain a bullish factor, despite increasing oil output from the US.

“Furthermore, rising geopolitical tensions in the Middle East will also support prices,” he said.