Brent steady amid Saudi supply concerns and Hormuz bottleneck

The front-month ICE Brent contract has dipped by $0.23/bbl on the day, to trade at $97.92/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude prices have remained broadly steady, supported by concerns over Saudi supply disruptions and as tanker traffic through the critical Strait of Hormuz continued to be largely stalled.

Attacks on Saudi Arabia’s energy infrastructure - including oil and gas production, transportation, refining, petrochemical facilities, and parts of the electricity sector across Riyadh, the Eastern Province, and Yanbu Industrial City - have reduced the kingdom’s oil production capacity by around 600,000 b/d. Throughput along the East-West Pipeline has also declined by approximately 700,000 b/d, according to the state-run Saudi Press Agency, citing an official from the Ministry of Energy.

Oil has received some support “amid fresh Middle East supply concerns,” two analysts from ING Bank said.

“Concerns of further oil supply disruptions were heightened after Saudi Arabia’s press agency said the nation’s oil production capacity has been cut by around 600kb/d due to attacks on energy infrastructure,” added Daniel Hynes, senior commodity strategist at ANZ Bank.

At the same time, a fragile two-week ceasefire between the US and Iran began to show signs of strain within a day. Washington accused Tehran of breaching commitments related to the Strait of Hormuz, while Israel launched strikes on Lebanon that Iran claims violate the truce.

The upward pressure also came “as the US-Iran ceasefire failed to allay fears of further supply disruptions,” said Daniel Hynes, senior commodity strategist at ANZ Bank.

“Even if transit through the Strait of Hormuz resumes, the return of energy supplies is unlikely to be immediate. Output has already been reduced at oil and gas fields, while refinery operations have been curtailed or temporarily shut, suggesting that some supply disruptions may take weeks, or longer, to fully reverse,” ING Bank analysts warned.

Downward pressure:

Brent crude prices faced mild downward pressure after the latest weekly inventory data from the US Energy Information Administration (EIA).

US commercial crude inventories increased by 3.1 million bbls to 464.7 million bbls in the week ending 3 April, according to the EIA.

By Tuhin Roy

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