Brent gains on Middle East tensions
The front-month ICE Brent contract has gained $1.54/bbl on the day, to trade at $89.79/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
Brent futures have shed previous losses amid renewed worries over supply disruptions from geopolitical tensions in the Middle East. The war between Israel and Hamas could exert additional pressure on global oil supply if other oil-producing countries like Iran and Saudi Arabia get involved, analysts said.
“The ongoing conflict could weigh even further on the global oil supply over time by potentially reducing the probability of Saudi-Israeli normalization and posing downside risks to Iranian oil production, leading to a further surge in oil prices,” said SPI Asset Management’s managing partner Stephen Innes.
Moreover, China’s recent announcement of supporting the country’s infrastructure with an additional RMB 1 trillion ($137 billion) central government bond (CGB) quota has helped Brent futures recover from the previous session’s losses.
Oil market analysts expect China’s new economic stimulus to drive demand in the country and push oil prices higher.
“China’s newfound greater tolerance for leverage at the central government amid more focus on growth than some had thought cannot be bad for [oil] markets,” Innes added.
Downward pressure:
Brent futures felt some downward pressure after the US Energy Information Agency (EIA) reported a surprise build of 1.37 million bbls in commercial US crude stockpiles in the week that ended 20 October.
The current US crude inventory level stands at 421.12 million bbls, the EIA said.
The weekly stockbuild ran counter to the American Petroleum Institute's (API) projection of a 2.67 million-bbl draw a day earlier.
Meanwhile, rising crude oil production in Canada has also added some downward pressure on Brent futures today, two analysts from ING Bank said.
“After major supply disruptions [in Canada] over the second quarter of the year due to wildfires, crude oil production has been recovering steadily, increasing the availability of crude oil for shipments which, in turn, weighed on prices,” they added in a client note.
By Aparupa Mazumder
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