0235 GMT: Crude oil futures were steady to lower during mid-morning trade in Asia July 14 as expectations of tightening near-term supply were countered by COVID-19 resurgences softening regional demand cues.
At 10:35 am Singapore time (0235 GMT), the ICE September Brent futures contract was down 18 cents/b (0.24%) from the previous close at $76.31/b, while the NYMEX August light sweet crude contract was down 23 cents/b (0.31%) at $75.02/b.Concerns about supply tightness have been heightened by the OPEC+ alliance’s ongoing stalemate over production quotas for August and beyond, while the outlook for demand recovery, especially in Asia, continues to be dampened by COVID-19 resurgences.
”Uncertainties surrounding OPEC+ production guidance and the lingering viral concerns are weighing on sentiment,” Margaret Yang, DailyFX Strategist, IG, told S&P Global Platts July 14.
The International Energy Agency’s monthly oil market report released late July 13 highlighted concerns about dwindling supplies if the OPEC+ alliance remains unable to agree on increasing production quotas for August.
”In that case, oil markets will tighten significantly as demand rebounds from last year’s COVID-induced plunge. The overhang in global oil stocks that built up last year has already been worked off, with OECD industry stocks now well below historical averages,” the IEA said in the report.
Furthermore, talks between US and Iran on a nuclear deal that could lift sanctions on Iranian crude oil exports have stalled, further adding to expectations of supply tightness.
”Any hopes of additional Iranian oil hitting the market also appear to be fading. Talks on a nuclear deal and subsequent removal of sanctions on Iran are unlikely to resume until after the Islamic Republic installs a new president next month,” ANZ analysts said in a July 14 note.
Meanwhile, the American Petroleum Institute reported that US crude supplies fell 4.1 million barrels in the week ended July 9, according to sources, in line with market expectations of a drawdown in US inventories.
Market participants were awaiting the US Energy Information Administration’s weekly report due for release later July 14 for further pricing cues.
”The market is expecting today’s EIA weekly report to show another strong drawdown in US inventories. This is likely to see crude oil prices extend gains amid a stalemate in OPEC talks to agree to output increases,” the ANZ analysts said.
However, the bullish sentiment stemming from expectations of tightening oil supply was being countered by signs of fragility in demand recovery, especially in Asia, where several countries continue to face rising COVID-19 cases.
In Indonesia, authorities reported a record increase in COVID-19 cases July 13, the sixth daily record in the past 10 days, and with total infections topping 2.6 million.
”The uncertainty over the potential global impact of the COVID-19 Delta variant in the coming months is also tempering sentiment,” said IEA in its July report.
The market is also awaiting OPEC’s monthly oil market report due for release July 15 for an update on OPEC’s views on the market.
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