Brent rises on bigger than expected US crude stock draw

The front-month ICE Brent contract gained $2.66/bbl on the day, to trade at $75.27/bbl at 09.00 GMT.

PHOTO: An oil pumpjack with the US Dollar in the background. Getty Images

Upward pressure:

Brent’s price moved up after the US Energy Information Administration reported a bigger-than-expected US crude stock draw. Commercial US crude inventories dropped by 4.26 million bbls on the week, to 440.77 million bbls on 8 December, according to the EIA.

“[Brent] prices received an early session bid from the weekly inventory report released by the Energy Information Administration [EIA],” said SPI Asset Management’s managing partner Stephen Innes.

The US Federal Reserve left interest rates unchanged after it concluded the two-day Federal Open Market Committee (FOMC) meeting yesterday. However, the central bank signalled that it will consider interest rate cuts next year. The anticipation of lower interest rates further fuelled Brent's rally.

A more positive demand forecast emerged in the oil market following the Fed’s ‘dovish’ signals of lower borrowing costs expected in 2024, analysts said. “This development [FOMC meeting] significantly reduced the likelihood of an economic slowdown in 2024 that could adversely impact demand,” Innes added.

Lower interest rates reduce consumer borrowing costs, thereby stimulating economic growth and demand for oil.

Downward pressure:

Concerns about slowing demand in China topped with the latest disappointing US Consumer Price Index (CPI) report have added some downward pressure on Brent futures.

China’s latest oil import data for November has disappointed the market, analysts said. Imports fell to 10.33 million b/d, a decrease of over 1 million b/d from October’s import (11.53 million b/d).

The drop in Chinese oil imports could signal declining oil demand in the world’s second-largest crude oil importer.

By Aparupa Mazumder

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