US inventory drawdown gives Brent a momentary lift

The front-month ICE Brent has gained by $1.04/bbl on the day, to trade at $84.38/bbl at 09.00 GMT. However, the futures contract has declined by 0.5% over the past week. PHOTO: US Federal Reserve Chairman Jerome Powell. Getty Images

Upward pressure:

Commercial US crude inventories were drawn by 6.13 million bbls on the week, to 433.52 million bbls on 18 August, according to the US Energy Information Administration’s (EIA) latest data. This is the lowest stock level since December last year.

The oil market awaits US Federal Reserve (Fed) chairman Jerome Powell’s speech at the Fed's annual summit in Jackson Hole, Wyoming. Meanwhile, Philadelphia Fed president Patrick Harker has suggested that the Fed could pause its current rate-hiking cycle.

“I’m in the camp of, let the restrictive stance work for a while, let’s just let this play out for a while, and that should bring inflation down,” Harker told CNBC. Harker is a voting member of the Fed's Open Market Committee, which decides Fed's key interest rates.

Downward pressure:

On the flip side, Powell could adopt a hawkish stance to combat the elevated level of inflation in the US. The prospect that Powell will signal additional hikes in the Fed's key interest rate has kept a lid on Brent's gains.

Reuters analyst John Kemp has reported that India’s oil demand growth is slowing down at a time when oil consumption in China, the US and Europe remains relatively tepid. As production in non-OPEC countries continues to grow, this slowdown in demand may impede the market's ability to absorb surplus oil and weigh on Brent’s price, Kemp said. 

The Iranian oil minister has forecast a 100,000 b/d increase in crude oil production in September, from the current output level of 3.3 million b/d, according to Iran’s state news agency IRNA. Iran will theoretically be able to export more oil to global markets with increased output, but lingering sanctions will make that unlikely.

By Konica Bhatt

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