Brent loses momentum amid demand growth concerns

The front-month ICE Brent contract has lost $0.42/bbl on the day, to trade at $76.30/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Oil and energy sanctions against Russia and Iran have raised supply concerns in the global oil market and have provided some support to Brent’s price in recent days.

“Approximately 6.3 million barrels of Pacific crude from Russian platforms at the Sakhalin Island project are stranded after the tankers hauling them to China were blacklisted,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Besides, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned several shipping companies and vessels last week, for transporting illicit Iranian crude oil to China.

“Oil prices are on the rise as the Trump Administration starts to crack down on Iranian oil exports,” Price Futures Group’s senior market analyst Phil Flynn said.

Downward pressure:

Brent futures erased the previous day’s gains following a significant surge in US crude stocks.

Crude oil inventories in the US surged by 9.04 million bbls in the week that ended 7 February, according to the American Petroleum Institute (API) estimates.

A surge in US crude stocks can indicate a drop in oil demand, which can cap Brent's price rise. “The oil market traded under pressure… as the latest inventory numbers from the American Petroleum Institute (API) remain largely bearish,” two analysts from ING Bank said.

Oil prices felt more downward pressure after the US Federal Reserve (Fed) chairman Jerome Powell commented that the US central bank is not considering any immediate interest rate cuts.

Higher interest rates can dampen global oil demand as it makes dollar-denominated commodities like oil costlier for holders of other currencies.

By Aparupa Mazumder

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