Brent trapped between Middle East escalation and US inventory gains

The front-month ICE Brent contract has lost by $0.71/bbl on the day, to trade at $89.21/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude’s price has felt upward pressure on the back of escalating tension between the US and Iran.

Tehran has reiterated that the Strait of Hormuz will remain closed unless Washington agrees to the six sweeping conditions it announced earlier this week.

The demands include a total cessation of all US military action in the region and the immediate withdrawal of all US naval and air forces from around Iran, among others.

“The likelihood of a deal to reopen the Strait of Hormuz remains low,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Brent’s price gains were capped after the American Petroleum Institute (API) reported a sizeable increase in US crude stocks.

US crude oil inventories increased by 9.07 million bbls in the week ending 7 August, against market expectations of a 500,000-bbl draw.

A build in US crude stocks typically indicates lower demand for oil and can put some downward pressure on Brent's price.

By Aparupa Mazumder

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