Crude oil futures resume climb after overnight fall; US crude stocks drop

Crude oil futures rose in mid-morning Asian trade March 23, resuming their upward climb after easing slightly overnight, while US crude stocks fell last week, signaling a further tightening of the oil market.

At 11:44 am Singapore time (0344 GMT), the ICE May Brent futures contract was up $1.90/b (1.65%) from the previous close at $117.38/b, while the NYMEX May light sweet crude contract rose $1.66/b (1.52%) at $110.93/b.

The sharp rally in oil prices since late last week stalled overnight, with both crude benchmarks settling 0.12%-0.32% lower on the day. The Relative Strength Index on the four-hourly candlestick charts for ICE Brent crude had showed the contract approaching overbought territory on March earlier this week.

"Oil prices traded in a choppy manner yesterday, although the market did settle lower on the day," ING analysts Warren Patterson and Wenyu Yao said in a March 23 note. "This is despite uncertainty over what the EU may decide in terms of further sanctions on Russia."

EU ministers are set to meet in Brussels March 24 to weigh further sanctions against Russia, though analysts maintained it was unlikely the group will proceed with an outright ban on Russian oil imports.

Nonetheless, industry executives, including heads of oil trading houses Vitol, Trafigura and Gunvor, have warned of a coming diesel shortage as many buyers steer clear of Russian oil out of caution.

"The diesel market is extremely tight," Trafigura's head of commodity trading Jeremy Weir told the FT Commodities Global Summit March 22. "It is going to get tighter, and we are possibly leading to stockouts."

ING's Patterson and Yao said: "In Europe, gasoil inventories in the ARA region are at their lowest levels since 2008 for this stage of the year. It is a similar story for Singapore. In the US, distillate stocks are at their lowest levels since 2014 for this time of year."

Although there are no official EU-level sanctions in place for buying and using Russian oil, about 2 million b/d of Russian crude and 700,000 b/d of its oil product exports have already been disrupted as a result of refiners and traders "self-sanctioning," according to S&P Global Commodity Insights.

The European Commission has also said it plans to propose by mid-May the phase-out of Russian fossil fuels by 2027.

American Petroleum Institute data March 22 showed US crude oil stock falling 4.28 million barrels in the week ended March 18. Distillate stocks, meanwhile, fell 826,000 barrels over the same period, while gasoline stocks edged lower by 626,000 barrels.

Dubai crude swaps were higher in mid-morning trade in Asia March 23 from the previous close, though intermonth spreads were mixed.

The May Dubai swap was pegged at $105.76/b at 11 am Singapore time (0300 GMT), up $2.21/b (2.13%) from the March 22 Asian market close.

The April-May Dubai intermonth swap spread was pegged at $3.99/b at 11 am in Singapore, down 2 cents/b over the same period, while the May-June spread was pegged at $2.66/b, up 8 cents/b.

The May Brent-Dubai EFS was pegged at $11.19/b, up 24 cents/b.