Brent up after big drawdown in US crude stocks outweigh demand concerns

The front-month ICE Brent contract has increased by $0.89/bbl on the day, to $75.19/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained after the US reported a big drawdown in crude stocks, outweighing concerns about weak global oil demand.

According to the US Energy Information Administration (EIA), crude oil inventories in the US dropped by 9.6 million bbls in the week ended 23 June.

The EIA report along with the OPEC+ nations’ pledge to continue output reduction into 2024 has led the oil market to worry about the increasing supply crunch.

“The belief that OPEC+ will take further action if there is significant further weakness provides a floor to the market,” said ING’s market analyst Warren Patterson.

Downward pressure:

Brent felt some downward pressure as weak economic recovery from the pandemic in China, the world's second-largest oil consumer, has not improved as much as the market had expected.

The market is “concerned that signs of slowing in the broader economy will begin to impact demand in China from Q3 onwards,” said SPI Asset Management’s managing partner Stephen Innes.

The talk of “peak oil” demand is exaggerated, commented the Price Futures Group’s senior analyst Phil Flynn. “The problem is the lack of investment in fossil fuels and if we indeed reach that level, the question will be is the world going to produce enough oil to meet that demand,” he said.

By Aparupa Mazumder 

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