Brent inches up as supply concerns resurface

The front-month ICE Brent contract gained $0.23/bbl on the day, to trade at $85.44/bbl at 09.00 GMT.

PHOTO: An oil barrel. Getty Images

Upward pressure:

Brent futures gained following news that Ukraine has launched a barrage of drones on Russia earlier today. The news has triggered concerns about supply disruptions in the global oil market, according to oil market analysts.

A Ukrainian drone crashed into the Ilsky oil refinery in Russia’s southern Krasnodar region and caused a fire. The Ilsky oil refinery is one of the biggest refineries in Russia, with an annual refining capacity of about 6.6 million mt of crude (132,000 b/d), according to Reuters.

Other regional authorities said that Ukrainian drones caused fires at oil depots in the Tambov and Rostov regions in Russia, Reuters reported.

“[Brent] Oil prices held steady… due to escalating conflict in Eastern Europe and the Middle East, which raised supply concerns,” analysts from Saxo Bank said.

In the Middle East, Iran-aligned Houthi forces launched one unmanned surface vessel (USV) in the Red Sea on 12 June, which struck a container vessel, M/V Tutor. The ship has now sunk, the Associated Press (AP) reported.

“Geopolitical risk factors are also supporting oil as there is growing frustration with the inability to stop attacks by the Houthi rebels in the Red Sea,” Price Futures Group’s senior market analyst Phil Flynn said.  

Brent’s price also gained after the US Energy Information Administration (EIA) reported a huge drawdown in US crude stocks and supported the market’s demand growth narrative. Commercial crude oil inventories in the US declined by 2.55 million bbls to 457 million bbls in the week that ended 14 June.

Downward pressure:

Concerns about a slowdown in demand growth in China amid reports of weak refinery margins continued to limit Brent’s price gains this week, analysts said.

Chinese refiners processed 60.52 million mt (around 14.25 million b/d) of crude oil last month, a decline of about 1.8% year-on-year.

Besides, refinery operations in the US currently face threats due to tropical storms, according to VANDA Insights’ founder and analyst Vandana Hari. “Tropical Storm Alberto lashed Mexico and the coast of southern Texas with strong winds and heavy rain on Thursday,” she said.

By Aparupa Mazumder

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