Brent gains on concerns over tight global supply

The front-month ICE Brent contract has moved up $1.16/bbl on the day, to trade at $95.15/bbl at 09.00 GMT.

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Upward pressures:

Brent futures erased previous day’s losses as concerns about the tight global supply pushed oil prices higher today.

Saudi Arabia and Russia’s decision to extend oil output cuts into the fourth quarter of 2023 has prompted concerns about a supply crunch in the global market.

“Oil prices remain well supported, with ICE Brent edging closer towards $95/bbl as the market continues to become increasingly concerned over the tightness in the oil balance for the remainder of the year,” said ING’s head of commodities strategy Warren Patterson.

Commercial oil inventories in Europe, the US, and Japan are experiencing a “substantial decline”, commented SPI Asset Management’s managing partner Stephen Innes. “This sharp downturn results from a combination of remarkably resilient global demand and substantial production cuts enforced by the OPEC+ alliance, contributing to the current bullish dynamic in oil markets,” he further added.

Downward pressures:

Meanwhile, oil analysts expect the recent surge in oil prices to have a substantial impact on global inflation. Oil plays a pivotal role in major industries and with its prices on the rise, it might also influence prices for other goods and services. “The recent surge in oil prices, which have reached a 10-month high of $95/bbl, is causing ripples across the global economy and financial markets,” said Innes.

“There's a growing concern about the potential inflationary pressures this [oil prices] could exert on the global economy, potentially leading to an unfavourable shift in the global growth/inflation balance,” Innes added.

Moreover, Saudi Aramco’s chief executive Amir Nasser has lowered the company’s outlook for global oil demand, Reuters reported. The company now expects global demand to reach 110 million b/d by 2030, lower than its previous estimate of 125 million b/d. This news has added additional downward pressure on Brent futures.

By Aparupa Mazumder

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