Measures to keep oil supply tight drives Brent higher

The front-month ICE Brent contract has gained $1.16/bbl on the day from Friday, to trade at $88.46/bbl at 09.00 GMT.

PHOTO: Oil barrels in the colour of flags of OPEC+ member countries, on a world political map background. Getty Images

Upward pressure:

Brent futures extended last week’s gaining streak as expectations grew that the leaders of Organisation of the Petroleum Exporting Countries and its allies (OPEC+) would continue to tighten oil supply.

Last week, Russia’s deputy prime minister Alexander Novak stated that the Kremlin agreed with the OPEC members on parameters to extend production cuts. More details about the output cuts are expected this week.

Meanwhile, oil analysts expect OPEC’s leader Saudi Arabia to also extend its voluntary 1 million b/d output cut into October.

“Speculation is now growing that Riyadh may extend these supply restrictions into October, further constraining global oil supply and prompting reductions in oil inventories,” said SPI Asset Management’s managing partner Stephen Innes.

Another round of production cut by Saudi Arabia could help Brent break above $90/bbl level, commented ING’s head of commodities strategy, Warren Patterson.

Downward pressure:

Meanwhile, Brent futures face some downward pressure as oil production in some OPEC member nations have increased in recent days, analysts said.

This comes as OPEC members including Iran, Libya, Nigeria and Venezuela remain exempted from the group’s production cuts, said Patterson.

Iran is expected to increase its oil output to around 3.4 million b/d by the end of summer. This will bring Iran's oil production near pre-sanction levels of 3.8 million b/d, Patterson said in a note.

By Aparupa Mazumder

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