Brent moves higher as supply tightness concern resurface
The front-month ICE Brent contract gained $0.47/bbl on the day, to trade at $86.94/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
Brent futures moved closer to $87/bbl after the US Energy Information Administration (EIA) reported a massive drawdown in crude inventories in the US.
Commercial crude oil inventories in the US dropped by 12.16 million bbls to 449 million bbls in the week ending 28 June. The draw also marked the “biggest weekly decline since July 2023,” two analysts from ING Bank said.
The latest update from the US National Hurricane Center indicates that the approaching Hurricane Beryl still poses a threat to offshore oil production facilities in the Gulf of Mexico and may eventually impact refinery activity.
Oil giants, including Shell, BP, and ExxonMobil, have begun evacuating employees from their Gulf of Mexico offshore platforms as a precautionary measure, CNN reported. This news has put upward pressure on Brent’s price.
“Oil supply threats in the US due to Hurricane Beryl and a bullish oil inventory report from the EIA helped oil to make strong gains,” ING Bank’s analysts added.
Downward pressure:
The US Federal Reserve’s (Fed) preferred path for interest rate cuts this year remains unclear. The recent dovish speech by Fed chairman Jerome Powell at the ECB Forum on Central Banking in Portugal's Sintra has left some market analysts feeling even less confident about rate cuts.
“He [Powell] still exercised caution regarding future policy decisions,” SPI Asset Management’s managing partner Stephen Innes remarked.
The US Fed is expected to hold interest rates steady if the central bank fails to keep inflation below the 2% target.
Higher interest rates strengthen the greenback against other currencies, ultimately dampening demand for dollar-denominated commodities like oil.
By Aparupa Mazumder
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