Brent gains on unexpected drop in US crude stocks

The front-month ICE Brent contract has gained $1.99/bbl on the day, to trade at $96.76/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Tight supply in the global crude oil market continued to push Brent futures higher.

“Oil prices are back on the rise as a global supply shortfall is becoming more evident,” said Price Futures Group’s senior market analyst Phil Flynn.

Commercial US crude inventories fell by 2.17 million bbls on the week, to 416.29 million bbls on 22 September, the US Energy Information Administration (EIA) reported on Wednesday.

Moreover, production cuts by the top OPEC+ producers Saudi Arabia and Russia are making the oil market “extremely tight,” OANDA’s market analyst Craig Erlam said. These measures have “got people talking about $100/bbl oil again,” he further added.

Downward pressure:

Meanwhile, Brent’s rally towards $100/bbl mark might diminish due to demand worries and as oil analysts expect the US Federal Reserve (Fed) to hike interest rates in the coming months.

Central banks around the world remain committed to keeping inflation levels under control, according to analysts.

“[Oil] markets will be closely looking for any indication about what the Fed [officials] could do at their meetings later in the year,” said ING’s head of commodities strategy Warren Patterson.

More rate-hike cycles could increase the borrowing costs for non-dollar currency holders, which could dampen demand for dollar-denominated assets like crude oil.

By Aparupa Mazumder

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