Brent gains on signs of strengthening global demand

The front-month ICE Brent contract gained $1.27/bbl on the day, to trade at $83.78/bbl at 09.00 GMT.

PHOTO: A pumpjack and an oil refinery in Seminole, West Texas. Getty Images

Upward pressure:

Brent futures traded higher on the day amid growing hopes of improving oil demand in leading consumers – China and the US.

“Chinese [oil] demand remains strong, with crude oil imports up by 5% y/y to 88 mt [5% year-on-year to 88 million mt] in the first two months of the year,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Brent futures made some gains after the US Energy Information Administration (EIA) reported a decline in US gasoline inventories, falling by 4.46 million bbls over the week to 239.75 million bbls. Distillate stocks also declined for the seventh consecutive week by 4.13 million bbls to 117.01 million bbls.

Oil demand in the US “looks to be improving” as the US driving season approaches, Hynes commented.

Meanwhile, incessant Houthi attacks on commercial ships in the Gulf of Aden has forced shipping companies to stop using the Red Sea trade route. “The longer shipping times now required by many tankers is resulting in increased oil sitting on ships unavailable to the market,” Hynes added.

Downward pressure:

Commercial US crude inventories rose for the sixth week, rising by 1.4 million bbls to 448.5 million barrels in the week ended 1 March, the EIA reported. This has put some downward pressure on Brent futures.

“It’s been another rangy and choppy week in oil markets as traders continue to play offsetting hands,” SPI Asset Management’s managing partner Stephen Innes said.

Besides, high inflation in the US continues to dent market sentiments. Brent futures could lose recent gains if Inflation remains above the US Fed’s 2% target, which could lead to a delay in interest rate cuts by the central bank.

By Aparupa Mazumder

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