The price of ICE Brent crude rose above US$77 per barrel recently, buoyed by positive sentiment driven by a stronger physical market. Analysts from ING, including Ewa Manthey and Warren Patterson, highlighted ongoing strength in the oil market, which continued into early morning trading. Several factors, including geopolitical tensions and inventory data, are influencing the oil landscape.
Concerns over the flow of oil from Iran and Russia are adding support to the market. Reports have surfaced about a Chinese port operator in Shandong instructing local ports to refuse tankers that are sanctioned by the United States. This comes as Chinese refiners, which are major buyers of Iranian crude, face possible disruptions in their supply chains. If other ports follow suit, this could further complicate Iranian oil exports, which are already subject to multiple sanctions, and create new barriers for Iran’s crude oil in the global market.
In addition to geopolitical concerns, oil market sentiment was bolstered by the latest inventory data from the American Petroleum Institute (API), which revealed a 4 million barrel drop in US crude oil stocks over the past week. Inventories at Cushing, Oklahoma, the delivery point for US crude futures, also declined by 3.1 million barrels. This reduction in crude stockpiles helped maintain bullish sentiment in the oil market, with prices continuing to rise in early trading. However, the product side showed less favorable results. Gasoline and distillate stocks both saw an increase, rising by 7.3 million barrels and 3.2 million barrels respectively. Traders are awaiting the more widely watched Energy Information Administration (EIA) report, which is expected to provide further clarity on the state of US oil inventories.
Meanwhile, European natural gas prices experienced volatility. Initially, prices for TTF, a key European gas benchmark, came under pressure, trading just below EUR46 per megawatt-hour. However, the market saw a recovery later in the session, with TTF prices finishing slightly higher. The EU's natural gas storage levels are currently at 69%, which is down from 85% at the same time last year and below the five-year average of 75%. A more rapid-than-expected decline in inventories could stir concerns in the market, particularly as Europe faces colder-than-expected weather. These conditions could exacerbate supply worries, making it crucial for the market to closely monitor inventory levels.
In summary, the oil market remains supported by geopolitical uncertainties surrounding Iranian and Russian oil exports. At the same time, positive inventory data in the US is contributing to bullish sentiment. However, rising stocks of refined products and concerns over European gas inventories suggest that the market is not without its challenges. The coming weeks will likely bring further volatility, with global weather patterns and geopolitical tensions continuing to influence energy markets worldwide.
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