Brent spikes amid no Middle East ceasefire in sight

The front-month ICE Brent contract has moved $6.22/bbl higher on the day, to trade at $120.92/bbl at 09.00 GMT.

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Upward pressure:

Brent crude’s price has traded above $120/bbl amid faltering hopes of a US-Iran resolution anytime soon.

Market analysts have lost hope of any quick resumption in oil flows through the Strait of Hormuz and the Persian Gulf, according to two analysts from ING Bank.

“The oil market has moved from over-optimism to the reality of the supply disruption we are seeing in the Persian Gulf,” the analysts said.

Brent’s price has felt further upward pressure after US Energy Information Administration (EIA) reported a sizeable decline in crude stocks.

Commercial US crude oil inventories decreased by 6.2 million bbls to about 459.5 million bbls in the week ending 24 April, according to data from the EIA.

A decline in US crude stocks typically indicates improvement in demand for oil and can put some upward pressure on Brent's price.

The EIA data “continues to show buyers turning to the US for alternative supplies amid the ongoing Persian Gulf disruptions,” ING Bank’s analysts added.

Downward pressure:

While there were no significant downward pressures on Brent’s price today, market participants expect the UAE’s exit from OPEC and OPEC+ to put downward pressure on oil prices in the long term.

The UAE will exit the Saudi Arabia-led coalition from 1 May, the country's energy minister Suhail Al Mazrouei said.

The UAE’s national oil company, Abu Dhabi National Oil Company (ADNOC) has set a target to raise crude oil production capacity to 5 million b/d by 2027.

Abu Dhabi’s output is currently capped at 3.41 million b/d under the OPEC+ quota system.

By Aparupa Mazumder

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