Possible US inventory cuts and hurricane Idalia concerns push Brent upwards
The front-month ICE Brent has gained by $1.05/bbl on the day, to trade at $85.87/bbl at 09.00 GMT.
PHOTO: Approximate representation of west coast areas in the US (yellow) in a Hurricane Idalia's path (red). US National Hurricane Center
Upward pressure:
Money managers, such as energy-focussed hedge fund investors have 274,260 long positions in Brent futures, compared to 52,573 short positions as of 22 August, according to Commitments of Traders data released by the Commodity Futures Trading Commission. More long positions than short positions indicate that money managers expect Brent futures to rise in the near future.
American Petroleum Institute (API) estimates indicate that US commercial crude inventories have plunged by 11.49 million bbls in the week that ended 25 August, according to Trading Economics. The decline has far exceeded the 3.3 million-bbl draw estimated by analysts polled by Reuters.
“We expect to see another substantial drawdown in the Cushing, OK delivery point, and we will see those supplies fall below 30 million barrels this week,” said Phil Flynn, analyst at the Price Futures Group.
Additionally, Hurricane Idalia is forecast to make landfall as a Category 4 hurricane on Florida's west coast. The hurricane's potential to disrupt oil production and supply in the US has further supported oil prices.
Downward pressure:
Meanwhile, OPEC’s “fragile five” members [the nations which struggled with supply disruptions] – Iran, Iraq, Libya, Nigeria, and Venezuela - will now add more oil supply to the global market while demand remains modest, Ed Morse, global head of commodities strategy at Citi has told CNBC. Morse
Morse has predicted that Iran, Iraq, Libya, Nigeria and Venezuela could add around 900,000 b/d of crude oil this year in the market. “Even the US is going to be adding to the supply in the next five months,” he added.
By Konica Bhatt
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