0313 GMT: Crude oil futures were trading lower mid-morning July 7 in Asia as the rising number of new infections in the US continued to dampen market sentiment, overturning overnight gains. However, the decline was limited by Saudi Aramco's announcement of a hike to its official selling prices for August crude cargoes to Asia.
At 11:13 am Singapore time (0313 GMT), ICE Brent September crude futures were down 20 cents/b (0.46%) from the July 6 settle at $42.90/b, while the NYMEX August light sweet crude contract was down by 17 cents/b (0.42%) at $40.46/b.
"Crude is trading up modestly after the US holiday weekend benefiting from a robust Asian opening in equity markets and seemingly shrugging off the possible demand implications of the spike in COVID-19 cases across the US and other countries such as Australia," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 7.
Saudi Aramco's announcement of a hike in official selling price differentials for its August crude oil exports to Asia by $1/b for all grades on July 6 had also helped to lift market sentiment. In a survey by S&P Global Platts last week, market participants had expect the producer to raise its August OSP differential of its Arab Light crude by between 80 cents/b and $3/b.
Meanwhile, the climb in the number of coronavirus cases in the US continued to weigh on market sentiment. California, the most populous US state, saw hospitalizations jump 50% over the past two weeks, just as the number of new infections soared and registered a record increase of more than 11, 000 cases on July 6, according to media reports.
"The lower fatality rates suggest that the re-imposing of more extensive statewide or countrywide lockdown measures will be unlikely, so the economic cost from the second wave will be far less than the beat down in March," Innes added.
Meanwhile, the US' domestic gasoline consumption was also down by more than 20% year on year during the long Independence Day weekend, when increased travel is usually the norm. This could signal that demand for gasoline might be lackluster during the summer months ahead and expectations of a quick recovery unlikely.
"The refining profit margin for gasoline and diesel remains unattractive, and elevated inventories and weaker product demand are not leaving any hope for a material rebound," the ANZ analysts said in a note July 7.
Market participants will look for fresh cues from the inventory report by the American Petroleum Institute and the US Energy Information Administration, due later July 7 and July 8, respectively.
