Brent breaks above $90/bbl on supply cut extensions

The front-month ICE Brent contract has gained $1.08/bbl on the day, to trade at $90.36/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures extended gains, after the top two exporters from the Organization of the Petroleum Exporting Countries and its allies' group (OPEC+) announced the extension of voluntary oil supply cuts through the end of this year.

Earlier this week, Saudi Arabia and Russia decided to extend output cuts till December to stabilize the oil market.

“This decision [extension of voluntary cuts] reflects a strategic approach by OPEC+, which is in no hurry to ramp up production, considering that commercial stocks and time spreads remain moderately below or above their historical averages,” said SPI Asset Management’s managing partner Stephen Innes.

Brent futures drew additional support after the American Petroleum Institute (API) reported a 5.52 million bbls-draw in US crude oil inventories in the week that ended 1 September.

The broadly followed US government data on crude oil stockpiles from the US Energy Information Administration (EIA) is due later today.

Downward pressure:

Downward pressures acting on Brent futures this week trail back to the persistent fear about bleak economic recovery in China. Demand growth in the world’s second-largest economy has been under serious pressure due to recurring COVID-19 outbreaks in the country.

“Oil prices are pulling back on concerns allegedly that China’s economy is tanking,” said Price Futures Group’s senior market analyst Phil Flynn.

Even with China’s pledge to revamp consumption in ten different economic sectors, market analysts fear that Brent’s gains will be capped if the country fails to combat the current economic downturn.

By Aparupa Mazumder

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