Brent moves higher as supply concerns resurface in the global oil market
The front-month ICE Brent contract gained $0.86/bbl on the day, to trade at $79.63/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Supply concerns have resurfaced in the global oil market and lent some support to Brent’s price.
OPEC+ members, including Saudi Arabia, the UAE, and Russia, have reiterated the group’s readiness to pause or reverse the gradual increase in oil production that is expected to kickstart from October this year.
On Sunday, OPEC+ decided to gradually phase out its combined supply cut of 2.2 million b/d between October 2024 and September 2025.
“The group [OPEC+] rejected the market’s bearish reaction to its decision to phase out voluntary cuts and said that it retains the option to pause or reverse production changes, if necessary,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
Recent Ukrainian drone attacks on Russian oil facilities near the Russia-Ukraine border have also put some upward pressure on Brent’s price. Two suspected Ukrainian drones struck oil facilities in Russia's Rostov and Belgorod regions yesterday, causing fire incidents at both locations, Russian officials said.
Besides, oil prices moved higher following the European Central Bank’s (ECB) decision to cut its key interest rate by a quarter-point to 3.75% from a nine-month high of 4% at the bank’s 26-member rate-setting council meeting on Thursday.
This news has bolstered the oil market's anticipation of a sooner-than-expected rate cut by the US Federal Reserve (Fed), which will meet next week to discuss monetary policies.
Downward pressure:
Brent’s price gains were capped amid concerns about demand growth in the world’s largest oil-consuming nation – the US.
Commercial US crude oil inventories, a key indicator for demand growth, rose by 1.23 million bbls to 456 million bbls in the week that ended 31 May, the US Energy Information Administration (EIA) reported.
A jump in US crude stocks is often considered a negative indicator of growth in oil demand.
By Aparupa Mazumder
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