Brent moves higher as oil traders shift focus to supply concerns
The front-month ICE Brent contract moved $0.52/bbl higher on the day, to trade at $76.85/bbl at 09.00 GMT.
PHOTO: Silhouette of oil pumps. Getty Images
Upward pressure:
Brent’s price moved higher due to the resurgence of supply concerns in the oil-rich Middle Eastern region.
Chances of a retaliatory strike by Iran or its regional proxies on Israel, following the assassination of a senior commander of the Hamas armed group has kept oil market analysts and traders on the hook.
“Any spike in Middle Eastern tensions could drastically heighten the risk of supply disruptions, effectively leaving oil traders feeling as though they’re perched precariously on a barrel of dynamite,” SPI Asset Management’s managing partner Stephen Innes said.
Brent found further support as the global oil market “showed signs of tightening, adding momentum to the rally,” Innes added. This comes from a significant drawdown in oil production in Libya. The country's National Oil Corporation announced on Tuesday that it will gradually reduce production from its El Sharara oil field, according to a Reuters report.
The El Sharara oil field has a production capacity of 300,000 b/d, while output from the field has plunged to about 200,000 b/d, according to reports. “Production at Libya’s Sharara oilfield has been reduced due to protests, further exacerbating supply worries,” analysts from Saxo Bank noted.
Downward pressure:
Some downward pressures acting on Brent stem from an unexpected rise in US crude stocks. Crude oil inventories in the US moved 180,000 bbls higher in the week that ended 2 August, according to the American Petroleum Institute (API) estimates.
A rise in US crude stocks can dampen oil demand growth and put downward pressure on oil prices.
The US Energy Information Administration (EIA) projected global oil demand to increase by 1.1 million b/d to reach 102.9 million b/d in 2024, unchanged from its previous estimate. It also sees demand growth of 1.6 million b/d to 104.5 million b/d in 2025, down by 200,000 b/d from its July forecast.
The reduction in oil demand growth forecast for 2025 stems from an apparent economic slowdown in China, the EIA said. “Most of the reduction in our oil consumption forecast is in China, where we expect slowing economic growth will continue to reduce diesel consumption.”
“The [oil] market was reminded of the uncertain economic backdrop,” after the EIA released its monthly oil supply-demand estimates, ANZ Bank’s senior commodity strategist Daniel Hynes said.
By Aparupa Mazumder
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