Brent gains on renewed supply concerns
The front-month ICE Brent contract gained $0.72/bbl on the day, to trade at $86.66/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
Brent futures have risen due to mounting supply concerns, driven by ongoing geopolitical tensions in the Middle East and between Russia and Ukraine.
The heightened tension follows the shutdown of a 70,000 b/d crude unit at Rosneft's Kuibyshev refinery in the Russian city of Samara after a Ukrainian drone attack on Saturday.
“Rosneft’s Kuibyshev oil refinery in Samara shut half its capacity after an attack,” ANZ Bank's senior commodity strategist Daniel Hynes noted. The recent drone attacks on Russian energy facilities led to a 7% decline in the country’s refining capacity, Saxo Bank’s chief China strategist Redmond Wong estimated.
In the Middle East, tensions escalated after a Houthi militia member warned Saudi Arabia and other US-allied nations in a televised interview, stating that any supporter of Israel would be considered a “legitimate target.”
The Russian government also instructed oil companies to reduce crude output in the second quarter to meet the 9 million b/d target set within the OPEC+ alliance, Reuters reported citing three sources.
“Several national officials indicated the [OPEC+] measures are successfully staving off any supply surplus” in the global oil market, Hynes added.
Downward pressure:
The United Nations Security Council (UNSC) adopted a resolution yesterday, urging an immediate ceasefire between Israel and Iran-aligned Hamas militants, also calling for the immediate release of all remaining Israeli hostages.
This development has alleviated some supply concerns in the global oil market, exerting downward pressure on Brent futures.
Meanwhile, oil market analysts are awaiting the release of US inflation data due later this week. The US Federal Reserve (Fed) is widely expected to postpone its interest rate cuts if the inflation remains at higher levels.
Higher interest rates may restrain global oil demand growth, as dollar-denominated commodities like oil become more expensive for non-dollar holders.
By Tuhin Roy
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