The front-month ICE Brent contract has edged $0.12/bbl lower on the day, to trade at $86.18/bbl at 09.00 GMT, says an article published on Engine.
According to the International Energy Agency (IEA), oil markets are expected to tighten by the end of this year. Pressure will come from Saudi and Russian supply cuts through September and shrinking global inventories amid rising demand. The impending supply crunch could drive Brent higher this year, the IEA has forecast.
Meanwhile, US Strategic Petroleum Reserves (SPR) plunged below 350 million bbls in the week to 4 August, according to the US Energy Information Administration (EIA). This is the lowest level since August 1983.
Sudden price fluctuations
As a cushion against potential supply disruptions, the low SPR level could expose the US to geopolitical shocks and sudden price fluctuations. As a result, the US could lose its strategic advantage of having access to cheap crude to mitigate sudden market shortfalls.
An EU official source has told Oilprice.com that Iraq does not want to resume oil supply from its Kurdistan-operated northern oil fields. This decision has kept nearly 450,000 b/d of Kurdish oil away from the global market.
The downward pressure on Brent remains dominated by concerns about China’s economic recovery after lengthy Covid-19 lockdowns. Declining Chinese oil imports in July have further dampened the sentiment.
China’s crude oil imports declined by 19% in July compared to June, reported market intelligence provider JLC, indicating weakening demand from the world’s largest oil importer.
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