Crude oil futures were lower during mid-morning trade in Asia Friday on profit-taking. A stronger US dollar has also suppressed prices from moving higher, market participants said.
At 10:27 am Singapore time (0227 GMT), June ICE Brent crude futures fell 21 cents/b (0.28%) from Thursday's settle to $74.53/b, while the June NYMEX light sweet crude contract dipped 20 cents/b (0.29%) to $67.99/b.
While the focus of the market remains US President Donald Trump's stance on the US-Iran nuclear deal, investors saw fit to lock in profits ahead of the weekend, industry sources said.
"Geopolitical events have been the main driver of the recent bull in prices," Vishnu Varathan, senior economist at Mizuho Bank, said.
"There is uncertainty stemming from demand [as seen in the crude builds from the US Energy Information Administration data], and the wider market is waiting to see the impact of higher crude oil production from the US," Varathan added, saying that it is a nice level to take profit ahead of the Federal Open Market Committee meeting next week. Market participants have also attributed the dip in prices to a stronger US dollar. A stronger US currency denotes weaker commodity prices as many commodities, such as crude oil, are priced against the dollar, making procurement more costly. The net impact is typically seen as bearish.
"US dollar has surged quite a bit in the last week or so due to expectations of a rising US bond yield and it has caught the market off guard," said Janu Chan, senior economist at St George bank.
Some however, felt that the dip in prices during mid-morning trade in Asia Friday is negligible as supply concerns and geopolitical events will provide a floor to crude oil prices.
"We should not be too concerned about the minute profit-taking in the morning," said Barnabas Gan, commodity economist at OCBC Bank.
"There are more news coming out of Venezuela indicating that their economic problems are to stay, and crude production from Venezuela will not resume in [the] near term," Gan added.
On near to mid term outlook, Gan remained cautious over the recent rally in prices, saying that it was supported by speculations as seen from the uptick in open interest from the CFTC data.
On the US-Iran nuclear deal, Gan also mentioned that geopolitical events are a significant driver of crude oil but highly unquantifiable in terms of prices.
Meanwhile on the Shanghai International Energy Exchange, the most active September crude futures contract was up 42 cents/b (0.61%) from Thursday's settle at Yuan 442.1/b ($69.79/b). Price quotes at the INE website are delayed by 30 minutes.
Market participants will keep an eye out on the Baker Hughes rig count data, an early indicator of future US crude oil production, set to be published later Friday.
As of 0227 GMT, the US Dollar Index was down 0.05% at 91.35.
