Brent moves lower as market braces for a supply glut
The front-month ICE Brent contract has decreased by $0.75/bbl on the day, to trade at $66.45/bbl at 09.00 GMT.
IMAGE: Oil storage tanks. Getty Images
Upward pressure:
Brent’s price has found some support from geopolitical risks in the Middle East and Russia this week.
Russia’s northwestern port of Primorsk, a key hub for oil and fuel exports, came under a drone attack earlier today, Reuters reported. Debris from the drone set fire to a vessel and a pumping station, the report added.
“Oil prices are on the rise as global geopolitical risks continue to escalate, leading to uncertainty about whether the market is heading toward an oversupply or a potential shortage,” said Price Futures Group’s senior market analyst Phil Flynn.
Meanwhile on Thursday, Israel struck Houthi bases in Yemen’s capital city Sanaa, one day after launching an airstrike on Doha, Qatar, claiming that the airstrike targeted senior Hamas leaders based in Qatar.
“Escalating geopolitical tensions, following Israel's attack on Hamas' leadership in Qatar and prospects of tighter Western sanctions on Russian energy exports, might help put a floor under oil prices,” remarked two analysts from ING Bank.
Downward pressure:
Brent’s price has moved lower amid expectations of a supply glut in the global oil market.
The International Energy Agency (IEA) now projects an even bigger oil surplus for next year, with OPEC+ producers ramping up output and adding more barrels to global supply.
Global oil supply increased in August to a record 106.9 million b/d, about 1.3 million b/d higher than the previous month, the IEA noted in its monthly Oil Market Report (OMR).
The energy agency now projects global oil supply to grow by 2.7 million b/d to average 105.8 million b/d in 2025 and rise by another 2.1 million b/d to average about 107.9 million b/d in 2026.
Oil has felt downward pressure “amid softening demand and persistent concerns over a looming global supply surplus,” ING Bank’s analysts said.
By Aparupa Mazumder
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