Brent steady amid US crude stock draw and tariff threats

The front-month ICE Brent contract has gained $0.12/bbl on the day, to trade at $70.75/bbl at 09.00 GMT.

PHOTO: Crude oil barrel and a bar graph depicting oil prices. Getty Images

Upward pressure:

Brent’s price inched up after the American Petroleum Institute (API) reported a decline of 1.5 million bbls in US crude oil inventories for the week ending 28 February.

A drop in crude stocks is considered a positive indication for oil demand growth in the world’s largest oil consuming nation, according to market analysts. “It [API crude stock report] was a fairly neutral release,” two analysts from ING Bank said.

Besides, the US government has set a deadline of 3 April for oil company Chevron to cease operations in Venezuela. Despite the existing sanctions, Chevron had previously held a license allowing it to operate in the country and export crude oil to the US.

This news has spurred supply-related concerns in the market, analysts said.

“As production [in Venezuela] stops, 200k b/d [200,000 b/d] of supply is at risk,” ING Bank’s analysts said. “This will leave US refiners looking for alternative heavy grades of crude oil just as other suppliers — Canada and Mexico — face tariffs,” they further added.

Downward pressure:

Brent’s price gains were capped by the looming threat of a US trade war with Canada, Mexico and China, which has rattled financial markets and weighed on demand growth sentiment.

“[The oil market’s] sentiment wasn’t helped after US President Donald Trump announced that the tariffs on Canada and Mexico would start today [4 March] as planned, raising the prospect of a broader trade war,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Oil prices felt more downward pressure after eight members of the OPEC+ oil producers’ group participating in the 2.2 million b/d combined production cut reaffirmed their plans to proceed with a gradual unwinding starting 1 April.

“The prospect of rising OPEC+ supply, combined with intensifying uncertainty over tariffs, hit oil market sentiment,” ING Bank’s analysts added.

By Aparupa Mazumder

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