Brent trades in a narrow range as recession fears offset supply constraints

Front-month ICE Brent has inched $0.11/bbl lower on the day, to $78.86/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has drawn support from a stalemate between Iraqi and Kurdish officials over crude oil shipments from Iraq's Kurdistan-operated northern oil fields.

Norwegian oil and gas operator DNO has announced that it has “started an orderly shutdown of its operated oil fields in the Kurdistan region of Iraq.” Its Tawke and Peshkabir fields in northern Iraq produced a combined total of 107,000 b/d of oil in 2022, according to the company. “DNO had diverted oil production to storage tanks, but capacity is limited,” it has added.

“The standoff with Kurdish oil flows via Turkey continues and the halting of pipeline flows has meant that producers in the Kurdish region have had to start reducing output,” ING’s head of commodity strategy Warren Peterson has said. “The Kurdish and Iraqi authorities are still trying to work out an agreement which would allow roughly 400Mbbls/d [400,000 b/d] of oil flows from the Kurdish region to resume.”

Commercial US crude inventories shrank by a massive 7.49 million bbls on the week, to 473.69 million bbls on 24 March, according to official figures from the US Energy Information Administration (EIA). It has exceeded the 6.1-million-bbl decline predicted by the American Petroleum Institute.

Downward pressure:

Brent's price gain has been restrained by growing fears over a recession in the US and Europe. A recession in major economies could reduce oil demand, causing an oversupply in the oil market.

“For oil markets, it's out of the frying pan and into the fire; tightening credit conditions are flashing recession signals for H2 [second half of 2023],” according to SPI Asset Management’s managing partner Stephen Innes. He has also said that oil traders are “somewhat cautious” about the pace of China's post-Covid consumption recovery.

By Konica Bhatt

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