Brent futures head for second straight weekly gains

Front-month ICE Brent has increased by $2.84/bbl on the day, to $86.90/bbl at 09.00 GMT. Brent is on track to gain nearly 2% on the week.

PHOTO: Aerial view of an oil refinery. Getty Images

Upward pressure:

Brent futures remain elevated despite uncertain economic conditions. The return of Chinese travellers has fuelled near-term optimism over a pick-up oil demand.

OPEC and the International Energy Agency forecast steady oil demand growth this year with hopes that China's reopening will spur global travel and consumption.

The dire warnings of a global recession this year have also mellowed, with some economists and policymakers now suggesting that the US and Europe might not suffer a deep recession.

The EU's Economic Commissioner believes “there is a chance to avoid a deep recession and maybe to enter a more limited, shallow contraction,” since Europe has managed to curtail its energy dependence and bring down energy prices significantly.

Concerns that Russia may reduce its oil production output in response to Western sanctions have further underpinned Brent's price rally.

Downward pressure:

Commercial US crude stocks jumped by 8.4 million bbls to 448.01 million bbls in the week ending 13 January, according to official Energy Information Administration (EIA) data. The crude stocks have grown to their highest level since June 2021.

Even with US sanctions against Iran, the country's oil exports are increasing. Iran exported around 1.14 million b/d of crude in December, up 42,000 b/d from November, Reuters cites Silicon Valley Bank International saying. Vortexa reports that China imported 1.2 million bbls of Iranian oil in December, up 130% from a year earlier.

The US is turning a blind eye to Iran in order to reduce Russia's hold over the energy markets. This could pave the way for Tehran to supply more of the international energy market.

By Konica Bhatt

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