Brent sharply up with supply tightness back in focus

The front-month ICE Brent contract has gained $2.49/bbl on the day, to trade at $94.77/bbl at 09.00 GMT.

PHOTO: Oil barrels and pumpjacks on top of a map of Saudi Arabia. Getty Images

Upward pressure:

Brent has reversed losses from earlier this week as production cuts by the top OPEC+ producers Saudi Arabia and Russia have come back to the centre of attention.

“The global undersupply of oil should show up again in this week’s inventory data,” said Price Futures Group’s senior market analyst Phil Flynn.

OPEC+ supply cuts have contributed to limit global supply of medium-sour and heavy-sour crude oils and increased their prices globally, the US Energy Information Administration (EIA) recently said in a report.

Additionally, tension around China’s deteriorating economy have eased some after the People’s Bank of China (PBoC) vowed to support the country’s economy at the third-quarter Monetary Policy Committee (MPC) meeting held earlier this week.

This news has helped oil traders gain confidence in China's demand growth projections and put upward pressure on Brent futures. “Regardless of what you hear about the Chinese economy, their [China’s] oil demand and their refinery runs are still near record highs,” Flynn added.

Downward pressure:

Commercial US crude inventories rose by 1.59 million bbls in the week ending 22 September, according to an estimate by the American Petroleum Institute (API), cited by Trading Economics.

This week’s data “marked the second gain in US crude oil inventories in the last seven weeks,” reported Trading Economics. Oil market analysts expected a fall of 1.65 million bbls.

Meanwhile, Russian recently announced ban on gasoline and diesel exports has been moderated by Moscow. The country has now exempted higher-sulphur gasoil and bunker fuel sales from the ban, according to a government document released on Monday.

By Aparupa Mazumder

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