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Crude oil futures stop rising in Asia after a sustained rally but tight supply, strong demand outlook remains

October 12/2021

MOSCOW (MRC) -- Crude oil futures were stable to lower in mid-morning trade in Asia Oct. 12 after a sustained rally, with expectations of tight supply and strong demand set to continue supporting prices in the near term, reported S&P Global.

At 11 am Singapore time (0300 GMT), the ICE December Brent futures contract was down 7 cents/b (0.08%) from the previous close at USD83.58/b, while the NYMEX November light sweet crude contract was 13 cents/b (0.16%) lower at USD80.39/b.

"Oil prices may be taking a breather today after surging more than 20% since late August on tighter oil supplies and increasing demand," IG market strategist Yeap Jun Rong told S&P Global Oct. 12, adding that prices were still above USD80/b and expectations of a near-term uptrend remain intact.

Other analysts said the oil market continued to be supported by high gas and coal prices that raise the prospect of more switching to oil for power generation.

Tightened US supply has supported prompt-month WTI prices and contributed to the widening backwardation of the WTI forward curve. Front-month WTI settled at a USD7.33/b premium to the year-ahead contract Oct. 11, the widest backwardation since mid-July.

ANZ research analysts in a note Oct. 12 raised their 2021 oil demand forecast by 450,000 b/d amid continuing recovery in transportation fuel requirements as pandemic mobility restrictions ease across the globe.

"Demand is improving in China, while easing restrictions in other countries are keeping oil demand prospects strong. Transportation fuels are leading the charge as consumers return to the road. High gas prices are inducing gas-to-oil switching in heating and industrial sectors," the ANZ analysts said.

As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.

We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.

We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, the US Energy Information Administration (EIA) said in a monthly report, a smaller decline than its previous forecast for a drop of 210,000 bpd.
Author:Margaret Volkova
Tags:Asia, crude and gaz condensate, USA.
Category:General News
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