Extended supply cuts keep Brent above $90/bbl

The front-month ICE Brent contract has gained $0.51/bbl on the day from Friday, to trade at $90.25/bbl at 09.00 GMT.

PHOTO: Oil barrels next to an oil well. Getty Images

Upward pressure:

Supply cut extensions announced by Saudi Arabia and Russia continued to support oil prices. Earlier this month, both countries pledged to extend voluntary supply cuts till the end of 2023.

“OPEC+ is leveraging its robust pricing power, stemming from its substantial market share through its alliance with Russia,” said SPI Asset Management’s managing partner Stephen Innes.

Oil investors will now wait for fresh cues from demand growth projections by the International Energy Agency (IEA) and OPEC due later this week.

Moreover, concerns about halt in oil supply from Libya provided additional support to Brent futures. The country was hit by Hurricane Daniel over the weekend. Operations at four major oil ports in Libya, including Ras Lanuf, Zueitina, Brega and Es Sidra have been closed since Saturday evening, Reuters reported.

Downward pressure:

Downward pressures acting on Brent this week include growing strength in the US dollar against other currencies amid fear of another interest rate hike by the US Federal Reserve.

A higher interest rate makes the US dollar stronger, which in turn could drive down demand for dollar-denominated commodities like oil.

“The continued strength in the USD [US dollar] will likely provide some headwinds, not just to oil, but to the broader commodities complex,” said ING’s head of commodities strategy Warren Patterson.  

By Aparupa Mazumder

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