Brent gains as US crude stocks hit three-month lows

The front-month ICE Brent contract moved $0.92/bbl higher on the day, to trade at $80.74/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures increased after the US Energy Information Administration (EIA) reported an unexpected drop in US crude stocks.

Commercial US crude inventories fell by 9.2 million bbls on the week, to 420.68 million bbls on 19 January, as winter storms and extremely low temperatures paused refinery activity, according to the EIA. The latest data also marks the lowest stock level since October last year.

The weekly stock draw was bigger than the American Petroleum Institute's (API) projection of a 6.7 million-bbl draw a day earlier, while analysts expected a drop of 2.2 million bbls.

The Chinese central bank announced yesterday that it will reduce banks’ reserve ratio by a significant amount, injecting around $140 billion into its system, Reuters reported. This news has boosted China’s economic stimulus narrative, pushing up Brent’s price.

Brent’s price gained due to a “more substantial-than-anticipated drawdown in United States [US] crude inventories, a weather-induced decline in US crude production, economic stimulus measures in China, and geopolitical tensions,” SPI Asset Management’s managing partner Stephen Innes said.  

Downward pressure:

Some downward pressures acting on Brent today come from easing supply concerns in Libya and Russia.

Russia has continued crude oil shipment in its Ust-Luga port in the Baltic Sea, despite a fire in one of its fuel export terminals earlier this week. At the same time, Libya’s National Oil Corp said it is going to resume production in the country's largest oil field – the El-Sharara.

The El-Sharara oilfield produces almost 300,000 b/d and has been subjected to both local and political protests in the past.

By Aparupa Mazumder

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