Navigating The Forces Shaping Brent Crude Prices

Credits: Export Org UK

Amidst shifting market dynamics, recent developments in Brent crude prices reflect a delicate balance between bullish factors and potential challenges. The Engine source.

  • Brent crude gains $1.05/bbl to reach $85.87/bbl as money managers hold more long positions, and US crude inventories drop significantly.
  • Hurricane Idalia’s potential impact on US oil supply adds upward pressure, while OPEC’s “fragile five” nations increase supply amid modest demand.
  • Analyst Ed Morse forecasts an addition of 900,000 b/d of crude oil to the global market from Iran, Iraq, Libya, Nigeria, and Venezuela, along with increased US supply.

Upward pressure:

Money managers, such as energy-focussed hedge fund investors have 274,260 long positions in Brent futures, compared to 52,573 short positions as of 22 August, according to Commitments of Traders data released by the Commodity Futures Trading Commission. More long positions than short positions indicate that money managers expect Brent futures to rise in the near future.

American Petroleum Institute (API) estimates indicate that US commercial crude inventories have plunged by 11.49 million bbls in the week that ended 25 August, according to Trading Economics. The decline has far exceeded the 3.3 million-bbl draw estimated by analysts polled by Reuters.

“We expect to see another substantial drawdown in the Cushing, OK delivery point, and we will see those supplies fall below 30 million barrels this week,” said Phil Flynn, analyst at the Price Futures Group.

Downward pressure:

Meanwhile, OPEC’s “fragile five” members Iran, Iraq, Libya, Nigeria, and Venezuela – will now add more oil supply to the global market while demand remains modest, Ed Morse, global head of commodities strategy at Citi has told CNBC. Morse

Morse has predicted that Iran, Iraq, Libya, Nigeria and Venezuela could add around 900,000 b/d of crude oil this year in the market. “Even the US is going to be adding to the supply in the next five months,” he added.

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