Brent rebounds on US crude stock draw

The front-month ICE Brent contract has gained $2.48/bbl on the day, to $74.30/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has pared some previous losses after the US Energy Information Administration (EIA) figures released on Wednesday showed that US crude oil inventories dropped by 9.60 million bbls in the week that ended 23 June.

“Energy traders turned bullish quickly after the EIA energy report showed a 9.6 million b/d draw and robust demand signs everywhere,” said OANDA’s market analyst Ed Moya.

Additionally, Saudi Arabia's 1 million b/d output cuts pledged in early June will come into force from July and is expected to add some upward pressure to Brent.

"An additional 1 million b/d unilateral cut by Saudi Arabia, set to take effect in July, coupled with seasonally stronger demand, should help to physically tighten the market in Q3," said analysts at BMI Research in a client note.

Downward pressure:

Concerns over further interest rate hikes that can potentially reduce global economic growth - with a knock-on effect on oil demand - have weighed on Brent this week.

"The market turned around on renewed worries about further rate hikes in the US and Europe, which will reduce global oil demand," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

Several central banks have hiked interest rates in recent days to control persistently high inflation, and have said that further monetary policy tightening will be required. The US Federal Reserve’s (Fed) chairman Jerome Powell has said that two additional US interest rate hikes this year is a “pretty good guess”.

Higher interest rates can cool off economies and have a negative impact on economic growth, which can have a direct effect on global oil demand.

By Aparupa Mazumder 

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