Brent futures gain on unexpected US crude inventory draw

Front-month ICE Brent has increased by $0.71/bbl on the day, to $94.77/bbl at 09.00 GMT.

PHOTO: The American Petroleum Institute has reported a 6.5-million-bbl decline in US commercial crude inventories in the week of 28 October. Getty Images   

Upward pressure:

The American Petroleum Institute (API) has estimated there was a 6.5-million-bbl decline in US commercial crude inventories in the week of 28 October, indicating that fuel demand is holding up. A Reuters poll estimated an increase of 400,000 bbls in commercial stockpiles.

Official weekly US government figures on crude and oil product stocks are due for release at 14.30 GMT today, and could provide Brent more direction then.

“Iran may be planning an imminent attack on energy infrastructure in the Middle East, particularly in Saudi Arabia, according to intelligence reports”, a US official has informed CNN. Brent values have been pushed upwards by concerns about a possible disruption in supply from the world's largest crude oil exporter.

Goldman Sachs commodities analyst Jeff Currie has told CNBC that Brent will test $115/bbl in the first quarter of next year. Currie observes that tight supplies will continue into 2023 due to the loss of US emergency reserves and the lack of shale production, and upcoming EU sanctions on Russian oil, resulting in a "significant upside" for oil.

Earlier this week, OPEC had forecast that Russian crude supply will decline by 700,000 b/d by 2030 due to geopolitical tensions surrounding its invasion of Ukraine, while US crude supply is expected to peak in the same period.

Downward pressure:

The Chinese government has imposed fresh lockdowns in the manufacturing district of Zhengzhou, despite unverified reports on social media that the Chinese government is preparing to phase out Covid-restrictions soon. Bloomberg has reported multiple Chinese districts are under “stealth lockdowns” to comply with President Xi Jinping’s zero-Covid policy.

Shale oil production in the US reached nearly 12 million b/d in August, the highest level since the beginning of the Covid-19 pandemic. US President Joe Biden is pressuring oil majors in the US to boost production to reduce fuel prices, threatening to impose a higher tax on excess profits if they do not.

By Konica Bhatt

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