Brent gains amid growing oil supply concerns
The front-month ICE Brent contract has moved $0.17/bbl higher on the day, to trade at $74.91/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Brent crude oil’s price has ended the week on a higher note following sweeping US sanctions against Iran, one of OPEC’s largest oil producers.
Washington's recent measures targeting Iranian oil, which aim to reduce Tehran’s exports to zero has supported oil prices. The global oil market had already anticipated a hardline stance from the Trump administration on Middle Eastern affairs.
“Crude oil endured a volatile session as Trump reiterated tighter sanctions on Iran and higher oil output in the US,” ANZ Bank senior commodity strategist Daniel Hynes said.
The market’s focus will now be on OPEC+’s next decision on whether to increase production or maintain output at current levels. Earlier this week, the Saudi Arabia-led oil producer group decided to stick to its current production policy of gradually raising oil output from April.
The decision to extend production cuts into 2025 signals that OPEC+ believes demand growth might not be robust enough to accommodate the full return of supply anticipated in 2025.
“President Trump has already made it clear that he wants OPEC to increase output. If he is successful in convincing the group to do that, it would help offset any potential losses from Russia and/or Iran,” two analysts from ING Bank noted.
“However, convincing OPEC may prove difficult, particularly considering that Saudi Arabia has a fiscal breakeven oil price of above $90/bbl,” they added.
Downward pressure:
The US Energy Information Administration’s (EIA) crude stocks report on Wednesday, showing a larger-than-expected surge in US crude inventories has capped some of Brent’s price gains.
Commercial US crude oil inventories surged 8.7 million bbls higher to touch 423 million bbls for the week ending 31 January, according to data from the EIA.
The stock build came despite a one percentage point increase in US refinery utilisation, which reached 84.5%.
A surge in US crude stocks can indicate a drop in oil demand, which can keep a lid on Brent price rises.
“Oil prices tumbled as bids vanished, shaking up traders just a day after the U.S. reported a massive crude inventory build that blew past expectations,” SPI Asset Management managing partner Stephen Innes said.
By Aparupa Mazumder
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