Brent jumps after US crude oil inventories reach record highs

Front-month ICE Brent has jumped $2.03/bbl higher on the day, to $82.96/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

There have been signs of sanctions eating into Russian oil output this month. Oil exporters from western Russian ports could be cut by as much as a quarter from February to March, three sources in Russia's oil sector reportedly told Reuters this week. That came after Russia's Deputy Prime Minister Alexander Novak announced a separate 500,000 b/d production cut for the country as a whole in March compared to January.

Brent has received support from optimism about demand growth in China and India.

There are several sources of oil demand upside potential in China's domestic market, from consumption to infrastructure, but fewer for export-oriented industries, according to ING's chief economist for Greater China Iris Pang. China's 5% GDP growth forecast is likely to be revised upward rather than downward, Pang writes.

India’s consumption of petroleum products is estimated to rise by 4.9% to 233.8 million mt for the year ending March 2024, according to the latest data released by the Indian Ministry of Petroleum and Natural Gas.

“Oil prices are higher as the short-term crude demand outlook appears to be improving, while stockpiles continue to rise,” says Ed Moya, senior market analyst at OANDA.

Downward pressure:

Commercial US crude oil inventories increased by 7.6 million bbls in the week that ended 17 February, according to the Energy Information Administration’s (EIA) latest weekly petroleum status report. US crude oil inventories are about 9% above their five-year average for this time of year, the report added.

US real GDP increased by 2.7% on the year in the fourth quarter of 2022. This was down from the advance estimate of 2.9%, according to the findings of the Bureau of Economic Analysis at the US Department of Commerce.

The latest US GDP estimates showed slower growth than expected, putting Brent under pressure. This came a day after the minutes from the Federal Reserve’s (Fed) meeting, held on 31 January – 1 February, suggested that most participants supported further interest rate increases. Investors remain concerned that higher interest rates will slow the US economy.

By Nitin Sharma

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