Brent holds $80/bbl as supply concerns offset demand woes

The front-month ICE Brent contract gained $0.28/bbl on the day, to trade at $80.10/bbl at 09.00 GMT.

PHOTO: An oil pumpjack. Getty Images

Upward pressure:

Drone attacks by Iran-aligned Houthi militants in the Red Sea have caused substantial delays to commercial shipping voyages, including those of oil tankers, this week. It has also supported Brent’s price.

“For the oil trade, it is a wake-up call,” commented Price Futures Group’s senior market analyst Phil Flynn.

Sustained Houthi attacks on vessels sailing in the Red Sea, and rising war-risk premiums, have put upward pressure on Brent futures, analysts said.

“War premium is a real cost. Because we are seeing shipments being delayed, taking longer routes is a real cost,” Flynn added.

Downward pressure:

Brent gains have been capped by a bigger-than-expected US crude stock build reported by the US Energy Information Administration (EIA). This could signal weaker demand growth in the world’s largest oil-consuming country.

Commercial US crude inventories increased by 2.90 million bbls on the week, to 443.68 million bbls on 15 December, according to the EIA.

The weekly stock build was bigger than the American Petroleum Institute's (API) projection of a 939,000 bbl build a day earlier.

Meanwhile, Brent futures felt additional downward pressure after domestic US oil production hit a record high, said SPI Asset Management’s managing partner Stephen Innes.

“A noteworthy milestone accompanied this surge [in US crude stocks], as domestic US oil production reached a new record high of 13.3 million barrels per day [b/d],” Innes said.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online