Brent moves lower on bearish inventory report

The front-month ICE Brent contract lost $1.07/bbl on the day, to trade at $89.73/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent experienced price gains in the last two days due to the spillover effect of the Middle Eastern conflict, which heightened supply concerns in the global oil market.

A ceasefire negotiation between Israel and Hamas continued for its third consecutive day without resolutions on the table, according to reports.

On Tuesday, a senior commander from the Iranian Navy said that Iranian forces could close critical trade routes such as the Strait of Hormuz, Gulf of Oman, and Aden, state-owned media agency IRNA reported. “This [news] should keep the risk of disruption to oil supply high,” ANZ Bank's senior commodity strategist Daniel Hynes commented.

“The extension of OPEC+ supply cuts until June-end also exerted upward pressure on Brent's prices as the market entered the second quarter of the year," Hynes added.

“Oil is on the rise as the headlines blast that the oil market is going to get extremely tight in the second half of the year and that OPEC has regained control of the oil market,” Phil Flynn, senior market analyst at Price Futures Group, remarked.

Downward pressure:

A bearish inventory report from the American Petroleum Institute (API) led to some downward pressure on Brent’s price this morning.

According to API’s data, US commercial crude inventories surged by 3 million bbls in the week ended 5 April. Oil market analysts had anticipated an increase of 2.4 million bbls for the week.

“Numbers released by the American Petroleum Institute (API) overnight were bearish for the oil market,” stated two analysts from ING Bank. “If confirmed by the Energy Information Administration (EIA), this would be the third weekly expansion in a row," they added.

Oil market analysts are currently awaiting US Consumer Price Index (CPI) data, followed by minutes from the US Federal Reserve's (Fed) latest Federal Open Market Committee (FOMC) meeting.

Analysts expect the Fed to maintain interest rates unchanged due to persistent inflationary pressures. Higher interest rates can dampen global demand as they increase the cost of commodities like oil for non-dollar holders.

By Tuhin Roy

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