Brent moves up on supply disruption concerns
The front-month ICE Brent contract has increased by $0.77/bbl on the day, to trade at $76.16/bbl at 09.00 GMT.
PHOTO: Oil pump jacks pictured at dusk. Getty Images
Upward pressure:
Brent’s price surpassed $76/bbl as concerns over supply disruptions continued to put upward pressure on oil.
Oil traders are “hypersensitive” to any news that could push oil prices up, especially with brewing geopolitical tensions in the Middle East, SPI Asset Management’s managing partner Stephen Innes remarked.
He further explained, “For example, an Iran-backed drone recently came alarmingly close to [Israeli Prime Minister Benjamin Netanyahu] Netanyahu’s residence.” This news rattled market participants because any further escalation between Tehran and Israel could imply severe risks to the energy facilities in Iran.
“The see-saw battle over Middle East risk premium continues,” VANDA Insights’ founder and analyst Vandana Hari said.
Downward pressure:
Brent’s price felt some downward pressure due to simmering demand growth concerns in the world’s largest oil consumer – the US.
Commercial crude oil inventories in the US increased by 5.5 million bbls to touch 426 million bbls on 18 October, according to data from the US Energy Information Administration (EIA).
A rise in US crude stocks indicates a decline in oil demand, which can put downward pressure on Brent’s price. “[Brent] crude oil fell after US inventories posted an unexpectedly high build,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
Additionally, expectations of a ceasefire deal in the Middle East have capped some of Brent’s price gains this week. The recent killing of Hamas leader Yahya Sinwar has “opened new possibilities” for ending the conflict in Gaza, Hynes said.
“The market continues to be caught between supply risks related to ongoing Middle East tension and lingering demand concerns,” two analysts from ING Bank said.
By Aparupa Mazumder
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