Brent plummets as some supply disruption concerns ease
The front-month ICE Brent contract has plunged by $3.08/bbl on the day, to trade at $72.13/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Brent’s price felt some upward pressure after the US Energy Information Administration (EIA) reported a slump in US crude stocks.
Commercial crude oil inventories in the US dropped by a massive 4.47 million bbls to touch 413 million bbls on 20 September, according to the EIA. A decline in crude inventories indicates oil demand growth and can put upward pressure on Brent’s price.
Yesterday’s inventory report showed a “tight physical oil market in the US,” the world's largest oil consumer, two analysts from ING Bank remarked.
Meanwhile, the global oil producers’ group OPEC highlighted in a recent report that peak oil demand is unlikely in the foreseeable future.
The Vienna-headquartered group sees global oil demand to surge by 10.1 million b/d between 2023 and 2029 to reach 112.3 million b/d. It further projects global oil demand to see a substantial growth of 120 million b/d by 2050, driven by non-OECD countries, including India and China.
Downward pressure:
Brent's price fell sharply amid signs that Libyan oil supply disruptions could ease sooner than expected.
Delegates from Libya’s rival eastern and western administrations came to a mutual agreement on leadership of the country’s central bank yesterday, according to a statement by the United Nations Support Mission in Libya (UNSMIL).
“The prospect of rising supply from Libya.. weighed on oil prices, with market participants ignoring a sharp fall in weekly inventory numbers,” ING Bank’s analysts noted.
In China, the recently announced economic stimulus measures have failed to lift Brent’s price, as market analysts consider these steps insufficient to bolster demand growth. This has put further downward pressure on Brent.
“Any revival in Libyan production would return to a market that is already beset by concerns of weak demand in the US and China,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
The next big indicator of China’s economic recovery will be the Manufacturing Purchasing Managers' Index (PMI) reading, due later this month.
A PMI reading below 50 typically signals weak economic health and a contraction in the manufacturing sector.
By Aparupa Mazumder
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