Brent inches higher as Saudi output cut prevails over mixed demand signals

The front-month ICE Brent contract has inched $0.12/bbl higher on the day, to $76.52/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent's upward price trend continues to be driven by Saudi Arabia’s commitment to cut production by 1 million b/d from July, outweighing concerns about increasing gasoline stocks in the US and disappointing Chinese export figures, which continue to impact demand dynamics.

US gasoline stocks increased by 2.75 on the week, to 218.82 million bbls on 2 June, according to US Energy Information Administration (EIA) data released yesterday. The weekly stock build-up comes despite the expectation of stronger travel demand during the Memorial Day weekend.

Brent drew further support after EIA’s recent short-term energy outlook, which indicated strong travel demand in the US during the summer season. The EIA also raised its forecast outlook for global oil demand by 1.6 million b/d for this year and projects additional 1.7 million b/d demand in 2024.

Downward pressure:

The EIA’s short-term energy outlook forecasts a rise in oil production in the US in the second half of this year as refineries ramp up production to meet rising demand and offset production cuts announced by OPEC and its allies.

Diesel demand in the US is forecasted to decline through 2024, EIA added in the report.

“With global bond yields rising sharply today, that might drive concerns that the market has mistimed the end of tightening, and that might lead to a weaker crude demand outlook,” said OANDA’S analyst Ed Moya in a note.

By Aparupa Mazumder 

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