Brent moves above $80/bbl mark on supply cuts and China's economic support pledge
The front-month ICE Brent contract has gained $0.39/bbl on the day, to $80.19/bbl at 09.00 GMT.
PHOTO: Black drum barrels of crude oil and Chinese flag on a world map. Getty Images
Upward pressure:
Brent broke above the $80/bbl mark earlier today as the oil market focused on production cuts from major producers, such as Saudi Arabia and Russia. Additionally, China’s recent pledge to support the country’s economy by driving consumption has boosted Brent.
On Wednesday, China's highest economic planner, National Development and Reform Commission (NDRC), pledged to roll out policies to “stabilise growth in 10 sectors” and “increase support for private firms” in the world’s biggest oil-importing nation, according to a Reuters report.
Moreover, Russia has pledged to reduce its oil exports by 2.1 million mt in the third quarter, in line with its planned voluntary cuts of 500,000 b/d in August.
Voluntary supply reduction has been the primary reason for the recent “mini-bull” run, said SPI Asset Management’s analyst Stephen Innes. “With demand uncertainty still lingering, supply will likely drive higher prices vs. demand,” he added in a note.
Downward pressure:
Brent felt some downward pressure as market analysts have raised doubts about Russia’s compliance with oil exports. There are questions whether Russia will follow the export cuts it has announced for August, ING’s head of commodities strategy Warren Patterson argued.
Lack of Russia's compliance with oil export cuts could limit the upside in Brent futures, said OANDA’s market analyst Ed Moya.
He further noted that a few cuts in interest rates and support for the property market in China will not be sufficient to boost the country's economy. “If China doesn’t appear strong the global growth outlook will get slashed and that could keep oil prices heavy a while longer,” he added.
By Aparupa Mazumder
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