Brent steady as market focuses on supply concerns

The front-month ICE Brent contract gained $0.31/bbl on the day, to trade at $82.48/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent’s price headed for a steady weekly gain as the oil market shifted its focus towards supply-related factors.

Russia’s energy ministry said it plans to strictly comply with its designated production quota in June and will make up for the extra crude oil pumped in April and May. The country produced about 9.18 million b/d of crude oil in May, 180,000 b/d higher than the official production level agreed within the OPEC+ group.

“[Brent] crude oil steadied following strong gains earlier in the week following reports Russia will dial back output,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

The Israel-Hamas conflict has continued this week and its ramification in the Red Sea has put further upward pressure on Brent’s price.

Iran-backed Houthi forces launched two anti-ship cruise missiles (ASCM) into the Gulf of Aden yesterday, which struck M/V Verbena, a Ukrainian-owned and Polish-operated bulk cargo carrier, twice within 24 hours, US Central Command (CENTCOM) reported. The missile strikes resulted in a fire, CENTCOM said. One crew member was “severely injured during the attack,” it added.

“The ongoing situation in Gaza, with ceasefire negotiations and Red Sea shipping attacks, is also being closely monitored [by the oil market],” analysts from Saxo Bank said.

Downward pressure:

Oil prices felt some downward pressure due to demand growth concerns in the US, according to analysts.

Commercial crude oil inventories in the US rose by 3.73 million bbls to 460 million bbls in the week that ended 7 June. US crude stocks have increased for the second consecutive week, according to the US Energy Information Administration (EIA).

“The [oil] market's gains were tempered by a surprising 3.73-million-barrel increase in US crude stockpiles, as well as larger-than-expected increases in US gasoline and distillate stocks,” analysts from Saxo Bank added.  

The US Federal Reserve (Fed) left interest rates unchanged at 5.25-5.5% at its two-day Federal Open Market Committee (FOMC) meeting that concluded on Wednesday.

Higher interest rates often curb consumer spending and put a cap on global oil demand growth.

“The Fed said that they’ve seen only modest further progress towards their 2% inflation goal in recent months,” Price Futures Group’s senior market analyst Phil Flynn remarked.

By Aparupa Mazumder

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