Brent gains after API projects another draw in US crude stocks

The front-month ICE Brent contract gained $0.97/bbl on the day, to trade at $80.59/bbl at 09.00 GMT.

PHOTO: Blue oil barrels. Getty Images

Upward pressure:

Brent futures shrugged off recent losses after the American Petroleum Institute (API) projected another drop in US crude stocks.

Crude oil inventories in the US declined by 4.5 million bbls in the week that ended 26 July, according to API estimates. This week’s data marks the fifth consecutive week of decline in US crude oil inventories. A draw in US crude stocks is a positive indicator of oil demand growth and could push prices higher, according to analysts.

The API report "helped to lift sentiment in the oil market,” two analysts from ING Bank said.

Besides, escalation of geopolitical tension in the Middle East continued to support oil prices. The Israel Defense Forces (IDF) launched a targeted attack in Beirut, following a missile strike by the Lebanon-based armed group Hezbollah on Saturday that killed 12 youngsters in the Israeli-occupied Golan Heights.

Brent’s price is expected to rise as this news has faded hopes of making some progress in the US-mediated ceasefire deal between Israel and Hamas, which could have eased crude oil supply concerns in the region.

Tension grew further in the Middle East amid reports that Iran-backed Hamas militant group’s leader Ismail Haniyeh was killed at his residence in Tehran.

“[Brent] crude oil trades higher… partly reversing recent losses following the killing of a Hamas leader,” analysts from Saxo Bank remarked.

Downward pressure:

Brent’s price felt some downward pressure due to weak demand concerns in China, analysts from Saxo Bank said.

The country’s purchasing managers' index (PMI), a key indicator of manufacturing activity, slipped to a five-month low in July, easing to 49.4 from 49.5 in June, its National Bureau of Statistics (NBS) reported.

The global oil market is currently focused on the two-day Federal Open Market Committee (FOMC) meeting starting today, to discuss interest rates for the rest of the year.

Higher interest rates can reduce oil demand growth as it makes the greenback stronger for dollar-denominated commodities like oil, against other currencies.

By Aparupa Mazumder

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