Brent inches up on supply cuts

The front-month ICE Brent contract has been broadly rangebound and gained $0.13/bbl on the day, to $77.87/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures continued to draw support from OPEC+ supply cuts made in July. Prices moved up after the world’s largest oil exporters Saudi Arabia and Russia extended output cuts into August.

In a recent joint statement, diplomats from Russia and the member-states of the Gulf Cooperation Council (GCC) have praised the “successful” efforts of the OPEC+ agreement to “stabilize the global oil market.”

Additionally, drilling activity in the US has declined further, according to data by Baker Hughes. The energy company in its latest report said that the number of active oil rigs in the US fell by five in the week ended 7 July to 540.

“Lower drilling activity suggests more limited supply growth,” ING’S market analyst Warren Patterson said. “This is a trend that we have seen in the EIA’s US crude oil supply forecasts with less than 200Mbbls/d [200 million b/d] of US supply growth expected in 2024,” he said in a note.

Downward pressure:

Growing concerns about slow economic growth in China and further monetary tightening in the US and other countries have weighed on Brent futures.

“The presence of economic slowdowns in China adds to the prevailing uncertainty in the oil market,” Rystad Energy's analyst Mukesh Sahdev said.

Oil investors are now watching out for further interest rate hikes after the US Federal Reserve’s chairman Jerome Powell said that further rounds of rate hikes in the US is a “pretty good guess”.

High interest rates affect global oil demand as it increases the borrowing costs for consumers, making them wary of buying oil.

By Aparupa Mazumder

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