Brent loses momentum as some supply concerns ease

The front-month ICE Brent contract has moved $1.17/bbl lower on the day from Friday, to trade at $80.47/bbl at 09.00 GMT.

PHOTO: Crude oil barrels. Getty Images

Upward pressure:

The latest round of extensive US sanctions against Russia’s energy sector, targeting the country’s major oil and tanker companies have fuelled some supply concerns in the global oil market, thereby supporting Brent's price.

“The market was already displaying signs of tightening before the outgoing Biden administration imposed the most sweeping round of sanctions to date on the 'shadow fleet' of tankers exporting crude from Russia,” independent market analyst John Kemp remarked.

The new sanctions are already prompting many Asian buyers to look for other alternatives. It could impact nearly 1 million b/d of Russian crude oil exports, according to market analysts.

“Last week an Indian bureaucrat told the media that sanctioned vessels won’t be allowed to discharge at India’s ports,” ANZ Bank’s senior commodity strategist Daniel Hynes said. “In China, companies have been snapping up cargo from the Middle East, after Chinese ports were urged to forbid sanctioned oil tankers from docking or unloading at their terminals,” he added.

Downward pressure:

The ceasefire deal achieved in Gaza after 15 months of relentless conflict, and right ahead of president-elect Donald Trump's swear-in ceremony into the White House has taken some risk appetite off the oil market and capped Brent’s price rise.

There is a “fair amount of uncertainty” across financial markets, ahead of Trump's presidential inauguration later today, two analysts from ING Bank remarked. “This combined with it being a US holiday today, means that some market participants may have decided to take some risk off the table,” they added.

Additionally, Iran-aligned Houthi militants announced yesterday a temporary halt on all armed operations against commercial vessels transiting the Red Sea, except Israeli-owned or flagged ships.

The Houthis will stop attacking commercial and cargo vessels transiting the crucial Red Sea trade route and the Bab al-Mandab transit as a ceasefire deal has been reached in the Gaza Strip, the Yemeni armed group’s spokesperson Mohammed al-Bukhaiti said on social media platform X (formerly Twitter).

Oil prices retreated as the “Yemen-based Houthis signaled a pause in their months-long attacks on commercial ships following a ceasefire deal between Israel and Hamas,” Price Futures Group’s senior market analyst Phil Flynn commented.

By Aparupa Mazumder

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