Brent moves lower on easing supply concerns
The front-month ICE Brent contract moved $0.76/bbl lower on the day, to trade at $80.87/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Brent’s price found support after the US Energy Information Administration (EIA) reported a drop in crude stocks. Commercial crude oil inventories in the US dropped by 3.74 million bbls to 436 million bbls in the week ending 19 July, the EIA reported.
The drawdown in stockpiles reported by the EIA “was the fourth straight decline and brings total stockpiles down to the lowest level since February,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
The OPEC Secretariat has received compensation plans from Russia, Iraq, and Kazakhstan for producing crude oil above their allocated production quotas in the first six months of 2024. This news has provided some support for prices.
The combined overproduction from the three countries totalled 2.28 million b/d between January and June 2024. During this period, Iraq exceeded its crude production quota by 1.18 million b/d, Kazakhstan by 620,000 b/d, and Russia by 480,000 b/d, according to OPEC.
The countries will make up for the excess supply in full over the next 15 months, ending in September 2025, the Vienna-headquartered group said.
Brent also found upward support from “a drop in US crude inventories and Russia's pledge for additional production cuts,” analysts from Saxo Bank noted.
Downward pressure:
Hopes for an imminent ceasefire agreement between Israel and Hamas have tempered Brent crude oil price gains this week. Israel’s Prime Minister Benjamin Netanyahu delivered an hour-long speech to the US Congress yesterday in which he outlined plans to gradually cease military operations in the Gaza Strip.
To further discuss the current situation in Gaza, Netanyahu will meet with US President Joe Biden today. He is also scheduled to meet with former US President Donald Trump in Florida tomorrow.
Brent’s price is expected to drop further if the US, Qatar and Egypt successfully crack a ceasefire deal, putting oil supply disruption concerns from the region out of the picture.
Signs of an economic slowdown in China have raised concerns about demand growth in the country. According to recent figures, China's GDP growth dropped from 5.3% in the first quarter to 4.7% in the second quarter.
By Aparupa Mazumder
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