Brent slides as oversupply fears mount
The front-month ICE Brent contract has declined even further by $2.07/bbl on the day, to trade at $67.37/bbl at 09.00 GMT.
IMAGE: (L-R) Russia, Saudi and US flags against oil pump and oil refining factory at night. Getty Images
Upward pressure:
The purchasing managers' index (PMI) for China's manufacturing sector has climbed to 49.8 in September, from 49.4 in August, China’s state-media Xinhua reported, citing official data.
"The figure showed that in September, production activities in the manufacturing sector accelerated, with the overall business climate continuing to improve," Huo Lihui, chief statistician with China’s National Bureau of Statistics, told Xinhua.
Higher industrial output typically requires more oil for power generation, refining and transport. An improvement in China’s output could suggest that its domestic oil demand is unlikely to ease in the near term, adding upward pressure on Brent.
Downward pressure:
Eight OPEC+ members will meet online on 5 October and potentially decide to increase the group’s combined output by at least 137,000 b/d in November, according to Reuters.
Iraq’s Kurdistan region has resumed crude exports to Turkey. This can potentially restore up to 400,000 b/d of supply that had been offline for more than two years and add more volume to global supplies.
The International Energy Agency (IEA) expects non-OPEC+ production to rise this year, with the US, Brazil, Canada, Guyana and Argentina projected to add around 1.4 million b/d in 2025.
This rise in production will add even more barrels to the global oil market and push Brent’s price even lower.
“We expect the market to move into a large surplus in the fourth quarter and remain in surplus through 2026. As a result, we expected oil prices to come under significant pressure over the course of next year,” ING’s head of commodity strategy, Warren Patterson has noted.
By Konica Bhatt
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