Brent moves higher as market continues to focus on supply concerns

The front-month ICE Brent contract gained $0.50/bbl on the day, to trade at $85.75/bbl at 09.00 GMT.

PHOTO: An oil pump jack. Getty Images

Upward pressure:

Growing geopolitical risks in the Middle East and eastern Europe have elevated concerns about supply disruptions in the global oil market.

Iran’s presidential election tomorrow is a major point of focus for the oil market as the outcome will determine the country’s future relations with the West. Analysts are concerned that a more “hard-line” president could further strain relations between Tehran and Washington, which could trigger additional sanctions on Iranian crude oil and oil products.

“The market remains underpinned by supply side issues,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Besides, Ukraine’s latest round of airstrikes on Russian energy infrastructure has heightened supply concerns in eastern Europe.

Russia has blamed the US for the recent Ukrainian missile attack on its energy facilities. This has raised “concerns that the war between Russia and Ukraine will drag the United States ever so closer to direct conflict,” Price Futures Group’s senior market analyst Phil Flynn remarked.

Downward pressure:

Brent’s price felt some downward pressure after the US Energy Information Administration (EIA) reported an unexpected build in US crude stocks.

Commercial crude oil inventories in the US rose by 3.59 million bbls to 461 million bbls in the week ending 21 June, against the market expectation of a 2.8 million bbl-draw, two analysts from ING Bank said.

The stronger-than-projected build was “unexpectedly bearish”, according to VANDA Insights’ founder and analyst Vandana Hari.

An increase in US crude stocks is seen as a negative indicator of oil demand growth and can put downward pressure on oil prices.

By Aparupa Mazumder

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