Brent sheds gains on concerns over Chinese economy

The front-month ICE Brent contract has shed $0.62/bbl on the day, to trade at $89.74/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Supply cut extensions announced by top oil producers Saudi Arabia and Russia have helped Brent futures to rise this week. Both countries announced on Tuesday that they will extend their supply cuts to the end of this year.

Brent drew additional support from the US Energy Information Administration’s (EIA) latest data that showed a dramatic fall of 6.31 million bbls in commercial US crude inventories in the week that ended 1 September.

The current US crude stocks stand at 416.64 million bbls, which is the lowest level since June last year, according to EIA. The weekly stock draw was bigger than the 5.52 million bbl-draw estimated by the American Petroleum Institute (API) earlier this week.

This large draw in US crude oil inventories was “driven by strong crude oil exports,” said ING’s head of commodities strategy, Warren Patterson. “EIA weekly inventory data, which was delayed by a day due to a public holiday earlier in the week in the US, was fairly constructive,” he further added. 

Downward pressure:

Meanwhile, Brent futures felt some downward pressure amid concerns about a slow pace of economic recovery in China.

“Evident structural challenges have caused the Chinese economy to teeter toward outright deflation,” said SPI Asset Management’s managing partner Stephen Innes.

By Aparupa Mazumder

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