Brent continues to focus on supply side dynamics

The front-month ICE Brent contract shed $0.12/bbl from Thursday's settlement price, to trade at $86.88/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have pledged to extend voluntary output cuts to the end of June this year. Oil investors are now awaiting the outcomes of the upcoming OPEC+ meeting. The coalition of oil producers is set to convene on 3 April to discuss output quotas and production levels for the rest of the year.

Russia’s Deputy Prime Minister Alexander Novak has confirmed the country’s plan to reduce crude oil production rather than exports in the second quarter of this year to adhere to OPEC+ quotas.

Tensions in the Red Sea and between Russia and Ukraine are also factors pushing Brent’s price closer to the $90/bbl mark.

Approximately 1 million b/d of Russia’s crude refining capacity is currently offline due to Ukrainian drone strikes on the country's energy facilities, Reuters reported citing energy consultancy Energy Aspects. This situation has added upward pressure on Brent futures.

Downward pressure:

Brent’s price gains have faced some resistance due to the rise in oil inventories in the world's top oil consuming nations, notably the US.

The US Energy Information Administration (EIA) reported a 3.17 million bbls increase in commercial crude oil inventories to 448 million bbls on 22 March.

Analysts from ING Bank noted that the "bearish" EIA report has impacted market sentiments. “The increase was predominantly driven by stronger crude imports, which grew from 6.3m b/d [6.3 million b/d] to 6.7m b/d [6.7 million b/d] over the reporting week,” they added.

By Tuhin Roy

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