Brent rises amid optimism over growing US demand

The front-month ICE Brent contract has gained $0.27/bbl on the day, to $85.51/bbl at 09.00 GMT.

PHOTO: 3D illustration of barrels with oil. Getty Images

Upward pressure:

Brent gained upward momentum after the US oil inventory data by the American Petroleum Institute (API) showed a drop of 15.4 million bbls in the week ended 28 July, Reuters reported citing market sources.

The fall in US oil stocks has raised hopes of strong demand growth during the summer season in the world’s largest oil consumer.

“Oil was the biggest gainer in July, wiping out all its cumulative losses from H1 to go flat on the year,” said SPI Asset Management’s analyst Stephen Innes.

Separately, the US government has offered to buy 6 million bbls of oil for the US Strategic Petroleum Reserve (SPR), a spokesperson from the US Energy Department told Reuters.

Oil investors are now waiting for more cues from the OPEC+ meeting later this week. They expect Saudi Arabia to announce an extension of its voluntary output cuts into September.

Downward pressure:

Brent futures felt some downward pressure amid growing concerns about China’s economic recovery.

Market analysts argue that actual improvement in demand in the world’s second-largest oil importer can only be seen if China discloses the strategies it has adopted to tackle COVID-19 outbreaks.

Additionally, further interest rate hikes by the US Federal Reserve (Fed) can also weigh down on Brent as a strong greenback makes commodities such as oil costlier for non-dollar buyers. The US Fed hiked interest rates by 25 basis points last week.

By Aparupa Mazumder

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