Brent extends gains on tight supply concerns

The front-month ICE Brent contract has gained $0.94/bbl on the day from Friday, to $84.99/bbl at 09.00 GMT.

PHOTO: Silhouette of oil pumps. Getty Images

Upward pressure:

Brent has extended gains from last week following comments from several market analysts, who emphasised on tightening of the global oil supply amid strong demand.

“Oil and product prices are starting to come to grips with a looming supply shortage,” said the Price Futures Group’s senior market analyst Phil Flynn.

Additionally, market analysts have said that any sign of improvement in China’s economy after the country’s pledge to support different financial sectors will drive demand growth for commodities such as oil.

“China's demand is now surpassing expectations, helping the likelihood of a price overshoot,” said SPI Asset Management’s analyst Stephen Innes.

Downward pressure:

Meanwhile, there are concerns in oil markets about the announcement of supportive policies by the Chinese government to spur growth in its economic sectors. These concerns have put some downward pressure on Brent futures.

“Up until now, there haven't appeared to be any actual policies that have been announced,” said ING’s head of commodities research Warren Patterson.

China is key for global oil demand growth, Patterson further commented. “The market has been getting increasingly concerned over the weaker-than-expected economic recovery, so any support measures will be helpful in easing some of these concerns,” he added in a note.

By Aparupa Mazumder

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