0235 GMT: Crude oil futures traded steady to higher in mid-morning trade in Asia July 17, supported by tightening global crude supplies, even as rising coronavirus cases worldwide continued to cloud the short-term demand outlook.
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Sign Up At 10:35 am Singapore time (0235 GMT), ICE Brent September crude futures were up 4 cents/b (0.09%) from the July 16 settle at $43.41/b, while the NYMEX August light sweet crude contract was up by 8 cents/b (0.20%) at $40.83/b.
"Risk-off sentiment had returned to Wall Street on Thursday amid fresh caution triggered by the lingering COVID-19 impact," Pan Jingyi, market strategist at IG, said in a note July 17.
Total worldwide infections stood at 13.7 million with a record rise in daily infections of 231,500 cases July 15, according to latest data from John Hopkins University. Brazil also surpassed 2 million cases nationwide, while in the US, Florida and Texas reported a record number of virus deaths July 16, according to media reports.
Meanwhile, cases continued to rise steadily in many other countries, including India and Russia, while major economies such as Japan and Australia which have eased restrictions are also witnessing a resurgence in cases, raising concerns of tightened lockdowns that could disrupt demand recovery.
On the supply front, while OPEC decided to taper production cuts by 2 million b/d to 7.7 million b/d from August, extra compensation cuts from countries that failed to meet production cut quotas in May and June by a combined 840,000 b/d will help to offset some of the production coming back online.
"OPEC+ did the right thing, but it's a whole new ball game. The decision to taper production cuts gives them some room to maneuver in case a second wave of the coronavirus forces a return of lockdowns that will shock crude demand," Edward Moya, senior market analyst, New York, Oanda, said in a note July 17.
However, crude prices remain well supported by inventory data released by the US Energy Information Administration July 15, which showed a large drawdown of 7.5 million barrels for the week ended July 15, much stronger than market consensus of a 2.1-million-barrel drop.
Elsewhere, the US oil and gas rig count rose by nine to 288 for the week ended July 15, rig data provider Enverus said. This marked the first weekly increase in over four months after a loss of nearly 560 rigs from early March to July.
"Lingering concerns about the potential impact on demand from rising coronavirus infections and a subsequent rebound in US production are the threat to the bullish view, so over the near term, the market will remain cautious. Still, the variables seem to be supportive of oil in the medium and longer term," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 17.
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