Brent set for 5% weekly gains on the back of supply disruptions in Iraq

Front-month ICE Brent has inched $0.51/bbl lower on the day, to $78.35/bbl at 09.00 GMT. The futures contract is heading for weekly gains of nearly 5%.

PHOTO: Getty Images

Upward pressure:

Brent has been supported by ongoing supply constraints. OPEC Iraq and the Kurdish government are at loggerheads over Kurdish oil supply. The current impasse in talks has prevented approximately 400,000 b/d of oil supply from Iraq's Kurdistan-operated northern oil fields.

“Oil producers including Norway’s DNO ASA, Gulf Keystone Petroleum and HKN Energy have started shutting down wells in semiautonomous Raqi Kurdistan,” says ANZ commodity strategist Daniel Hynes.

OPEC+ is expected to stick to its existing oil output cut agreement at its JMMC meeting on Monday, five delegates have told Reuters. One delegate said that recent oil price drops as a result of US and European bank failures and the Iraqi oil production loss have not been "sufficiently important" to alter the group's 2023 output plan.

Downward pressure:

Brent gains have been capped by strikes at French refineries. As the strikes enter their fourth week, a "record amount" of crude oil and petroleum products have been stranded on the water in wait of entry to France, while French crude oil stocks have declined sharply, according to analysts.

“The absence of French buying interest has increased supplies elsewhere of crude grades from the North Sea, west Africa and blends from the Caspian pipeline”, according to traders cited by Reuters. Kpler cargo tracking data has found that France has imported 30,000 b/d of crude oil from OPEC member Nigeria so far this month, which is a fraction of the 200,000 b/d imported in January-February, Reuters says.

Increasing concerns about a recession in the US and Europe have also weighed on investor sentiment and interest in Brent. Investors are concerned about the possibility of a global economic downturn following the mini banking crisis, which could lead to a drop in oil demand.

By Konica Bhatt

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