Brent declines amid production surplus concerns

The front-month ICE Brent contract has moved $0.49/bbl lower on the day, to trade at $73.49/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent’s price felt some upward pressure as the global oil market grew cautious of more US sanctions on Iran and Russian crude oil.

Washington is considering more sanctions on Russian and Iranian crude oil, Bloomberg reports. The new sanctions could tighten supply and move Brent’s price higher, according to market analysts.

Crude oil found some support from “potential US sanctions on Iran and Russia,” analysts from Saxo Bank said.

On the demand side, Brent’s price gained after the US Energy Information Administration (EIA) reported a slump in US crude stocks. Commercial crude oil inventories in the US declined by 1.43 million bbls to touch 422 million bbls for the week ending 6 December, according to data from EIA.

A drop in US crude stocks indicates oil demand growth, which can support Brent's price. “U.S. petroleum inventories have depleted significantly since the middle of the year in response to slower production growth from the U.S. shale fields,” independent market analyst John Kemp said.

Downward pressure:

Brent’s price came under pressure after the Paris-based International Energy Agency (IEA) forecasted a surplus in the oil market next year, in its latest oil market report.

Although OPEC+ decided to delay the planned output increase by three more months through March 2025, non-OPEC producers including the US, Canada, Guyana, Brazil, and Argentina, will boost supply by about 1.5 million b/d in both 2024 and 2025, the IEA estimated.

Total oil supply is on track to increase by 630,000 b/d in 2024 and by 1.9 million b/d in 2025 to 104.8 million b/d, “even in the absence of unwinding of OPEC+ cuts,” the IEA said.

By Aparupa Mazumder

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