Brent gains after API projects US inventory draw

The front-month ICE Brent contract has moved $0.13/bbl higher on the day, to trade at $72.40/bbl at 09.00 GMT.

PHOTO: Oil barrels with upward arrows suggesting Brent's price gain. Getty Images

Upward pressure:

Brent futures gained some upward support after the American Petroleum Institute (API) projected a decline in US crude oil stocks.

Crude oil inventories in the US dropped by 770,000 bbls in the week that ended 8 November, according to the API estimates.

The weekly inventory drop was against market expectations of a 1 million-bbl rise. A fall in US crude stocks indicates growth in oil demand, which can put upward pressure on Brent’s price.

Additionally, US inflation data suggested a gradual approach toward the US Federal Reserve's (Fed) 2% target. The US inflation rate, measured by the change in the Consumer Price Index (CPI), came in flat at 0.2% in October, matching the previous month's figure.

“The consumer price index met expectations, easing fears of a surprise uptick that might have thrown a wrench in the Fed’s easing plans,” SPI Asset Management’s managing partner Stephen Innes remarked.

Focus will remain on the International Energy Agency’s (IEA) monthly forecast for global oil demand, analysts said. “Oil traders are on edge as the International Energy Agency (IEA) prepares to release its latest monthly oil market report,” Innes added.

Downward pressure:

Oil market traders have reacted to “unconfirmed reports” of a complete overturn in diplomatic relations, analysts said, suggesting that Iran is opting not to retaliate against Israel, following Donald Trump’s victory in the 47th US presidential election.

“Any response may now not come until negotiations with the new administration begin,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Brent’s price felt some downward pressure after OPEC cut its forecast for oil demand growth in its latest oil market report. The Saudi Arabia-led group expects oil consumption to increase by 1.8 million b/d this year, about 107,000 b/d lower than its previous month's projection.

“It [OPEC] attributed the change to weakening demand in China and India,” Hynes said.

By Aparupa Mazumder

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