Brent moves higher on looming supply cut concerns

The front-month ICE Brent contract has moved $1.23/bbl higher on the day, to trade at $72.51/bbl at 09.00 GMT.

PHOTO: Oil barrels and an arrow depicting oil price gains. Getty Images

Upward pressure:

Brent crude futures moved higher on the back of supply disruption concerns emerging from the US and Libya.

Preventive shutdowns and evacuations of offshore oil production platforms in the US Gulf of Mexico due to concerns over Hurricane Francine’s impact has provided upward pressure to Brent’s price this week. Persistent disruption in Libya’s oil production provided additional support to Brent futures.

“[Brent] crude oil rallied for a second consecutive day as supply risks loomed over the market,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Nearly 42% of the total oil production capacity in the US Gulf of Mexico has been shut as of yesterday, Reuters reports.

“Supply disruptions from Hurricane Francine continue to provide some support,” to oil prices, two analysts from ING Bank remarked.

Downward pressure:

The International Energy Agency’s (IEA) oil market report yesterday reinforced a “bearish picture” in the global oil market, analysts said. Brent’s price gains were partially capped after the Paris-based energy agency cut the global oil demand growth outlook.

It now expects global oil demand to grow by 900,000 b/d, with total consumption expected to reach 103 million b/d in 2024, noting a decline of 70,000 b/d from its previous month’s projection. This decline can be attributed to a slowdown in China’s economic growth.

“In contrast to OPEC’s relatively positive outlook earlier this week, IEA said demand growth is slowing as China’s economy cools,” Hynes remarked.

By Aparupa Mazumder

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