Market Boost for Brent Oil as Prices Rise

by Milos Bezanov

Wednesday’s market data indicate an 85 cent rise for Brent futures to US$64.87, while U.S. crude prices rose to US$58.57 a barrel, according to reuters

This marks a break in last weeks trend, where Oil posted a loss, culminating in Tuesday’s 3% fall and is part of an overall downward trend in prices triggered by global oversupply and weakening demand.

However, higher than anticipated Japanese growth between January and March spiked confidence in the markets; “Japan is one of the major importers of crude oil and growth in this region would definitely be favourable for Crude demand” explains Singapore based brokerage Philip future.

Energy prices were further buoyed by Australian consumption rises, with government slashing of interest rates and tax breaks for small business increasing incentive to consume.

Brent Oil Price v.s. Supply

In unison with the Brent Oil Price, crude inventories fell 5.2 million barrels the previous week, well beyond the predicted fall of 1 million barrels

CMC Markets Chief markets analyst Michael Hewson is confident that this means stronger prices as inventory declines are a signal of greater demand; “The key for me is not so much that there are declines in inventories, it’s that those declines are accelerating” he explains

However, markets proceeded to tumble despite declines in U.S. stockpiles, with an overarching excess supply still prevalent in the oil markets; “ We are nearly 90 million barrels higher in U.S. crude, and about 14 million higher in gasoline, from a year ago, putting us well above the five-year average” explains Sal Umek of the Energy Management Institute in New York

Japan runs 3.02 million barrels of crude a day and has a refinery utilisation rate 77.1% for this most recent week. Both statistics are higher than the same time last year.