Brent breaks above $87/bbl as supply concerns intensify

The front-month ICE Brent contract moved $0.39/bbl higher on the day, to trade at $87.33/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent crude futures moved higher as supply disruption concerns continued to influence market sentiments.

An Israeli airstrike in southern Lebanon on Wednesday killed a senior member of the Iran-aligned Hezbollah militia, an official from the group told the Associated Press (AP). This news has heightened tension in the Middle East and has put an upward pressure on oil prices.

Brent's price gained “amid escalating tensions in the Middle East after Israel killed a senior Hezbollah commander, prompting retaliation near the border,” analysts from Saxo Bank said.

Russia’s two biggest oil producers, Rosneft and Lukoil, will cut oil exports from the Black Sea port of Novorossiisk in July, according to a Reuters report. This has also supported Brent’s price gains today.

On the demand side, the US Energy Information Administration (EIA) reported a massive draw of 12.16 million bbls in the US commercial crude oil inventories in the week ending 28 June. This draw has supported the market’s demand growth expectations and was “far exceeding” the expected 680,000 bbl-drop in US crude stocks, Saxo Bank’s analysts said.

Downward pressure:

Brent’s price experienced some downward pressure as the threats related to US oil supply disruptions from the approaching Hurricane Beryl faded, according to analysts.

The latest data from the US Bureau of Ocean Energy Management (BOEM) showed that the threats to oil supply disruptions in the Gulf of Mexico are “easing as the storm spares major drilling areas and platforms in US federal waters,” two analysts from ING Bank noted.

Saudi Arabia’s state-owned oil giant Saudi Aramco has cut prices for all crude oil grades to Asia for the second consecutive month, primarily due to weak demand from the Asian markets, Bloomberg reported. This news has capped some of Brent’s price gains today.

“The recent decision of Saudi Aramco to trim oil OSPs (official selling prices) has further weighed on the [oil] prices,” ING Bank’s analysts added.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online