Brent at five-month high as supply continues to tighten
Crude benchmarks rallied as hurricane disrupts US supplies and Opec holds reins on output
Brent crude rose to a five-month high as supply in the oil market continues to tighten, with Opec producer the UAE set to cut crude allocations by 30 per cent.
The benchmark for two-thirds of the world’s crude was up 1.16 per cent at $46.34 per barrel at 4.00pm UAE time, while West Texas Intermediate, which tracks US crude, was up 1.07 per cent at $43.43 per barrel.
Abu Dhabi National Oil Company, which produces most of the UAE’s oil, told customers it was cutting crude supply for oil by 30 per cent for October, from a 5 per cent reduction in September, a spokesman confirmed to The National on Monday.
The UAE, which accounts for 4 per cent of global output, is Opec’s third-largest producer.
The Opec+ alliance is currently cutting back 7.7 million barrels per day in a bid to rebalance supply and demand.
The alliance, headed by Saudi Arabia and Russia, cut at a historic level of 9.7m bpd for three months between May and July after a drop in demand as movement restrictions were imposed due to the coronavirus pandemic. The group has since tapered restrictions but has exerted pressure on overproducing nations such as Iraq, Kazakhstan, Angola and Nigeria to make compensatory cuts by September.
The group is expected to convene its next joint ministerial monitoring committee on September 17 to review compliance among its members.
Oil’s rally follows steady highs last week when powerful hurricanes shut down around 1m bpd of oil and 1.2 billion cubic feet of gas per day from the Gulf of Mexico.
US inventories also continued to decline, further tightening supply. The industry-funded American Petroleum Institute on Tuesday reported stocks fell by 4.52 million barrels last week, while gasoline inventories declined by 6.39 million barrels, marking a fifth weekly decline.
"Hurricane Laura swept through oil markets last week but despite being one of the strongest ever storms to hit the US Gulf coast, Laura failed to shake benchmark prices out of their trading range that has been in place for the last two months,” Emirates NBD said in a note on Monday.
Updated: August 31, 2020 04:20 PM