Brent declines on smaller-than-expected draw in US crude stocks

The front-month ICE Brent contract has moved $0.93/bbl lower on the day, to trade at $78.18/bbl at 09.00 GMT.

PHOTO: An oil pump jack. Getty Images

Upward pressure:

Supply disruption concerns due to growing geopolitical conflicts in the Middle East and Libya have continued to support to Brent’s price.

Several oilfields in Libya have stopped production amid a dispute over the control of the country's central bank, according to media reports. As a result, an estimated output disruption of about 900,000 b/d to 1 million b/d of crude oil is expected, Reuters reports.

“Libyan output has more than halved this week amid a political dispute,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked. “Output is at risk of falling further as more fields close,” he added.

Meanwhile, in the Red Sea, MV Sounion, a Greek-owned oil tanker, that caught fire last week following a drone strike, currently appears to be leaking oil, the US Pentagon said in a statement.

The oil tanker now seems to be stranded in the Red Sea with a potential leak, posing a direct threat to regional maritime navigation and marine life, the US Department of Defense said.

Downward pressure:

The US Energy Information Administration (EIA) reported a drop of 846,000 bbls in commercial US crude oil inventories, to touch 425 million bbls on 23 August.

The lesser-than-expected decline in US crude stocks has further raised demand growth concerns in the world’s largest crude oil consumer and put some downward pressure on Brent futures.

The crude stock draw was “not as constructive as expected” two analysts from ING Bank said. “Despite refineries increasing capacity utilization, EIA crude oil inventories fell less than expected,” Saxo Bank’s Asia-Pacific Research team wrote in a note.

By Aparupa Mazumder

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