Brent moves up after API reports another US crude stock draw

The front-month ICE Brent contract gained $0.61/bbl on the day, to trade at $77.45/bbl at 09.00 GMT.

PHOTO: Oil pump jack and the US Dollar. Getty Images

Upward pressure:

Brent futures gained to reverse some earlier losses after the American Petroleum Institute (API) reported a massive decline in US crude stocks, indicating demand growth in the world’s leading oil consumer.

Commercial US crude inventories declined by 5.2 million bbls in the week ended 5 January, according to API data.

The rising Houthi attacks on vessels in the Red Sea are raising concerns about oil shipments in the region, which could potentially result in higher Brent prices, analysts said.

“Brent crude settled around $78 per barrel, and traders are assessing factors such as disruptions in the Red Sea, a critical shipping lane,” SPI Asset Management’s managing partner Stephen Innes said.

Downward pressure:

Downward pressures acting on Brent futures this week arise from weak demand indications in China, the second-largest oil consumer of the world.

China’s state-owned refiners, Sinopec and PetroChina, reduced their refinery run rates in December due to weak domestic demand, market intelligence provider JLC reported. The decline in refinery runs suggests that demand in China is still lagging.

Meanwhile, Brent futures could come under additional downward pressure if Russia fails to adhere to the latest production quotas set by the OPEC+ oil-producer group, analysts said.

By Aparupa Mazumder

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