Crude prices mixed before Hurricane Laura landfall, US inventory drawdown

Singapore — 0250 GMT: Crude oil futures were rangebound in midmorning trade in Asia on Aug. 27 as possible supply disruption risks from Hurricane Laura and a larger-than-expected drawdown in US commercial crude inventories supported the market, even as rising COVID-19 cases worldwide keep weighing on sentiments.

At 10:50 am Singapore time (0250 GMT), the ICE October Brent crude futures was up 5 cents/b (0.11%) from the Aug. 26 settle at $45.69/b, while the front-month NYMEX October light sweet crude contract was down 7 cents/b (0.16%) at $43.32/b.

Hurricane Laura, a Category 4 storm, continued to strengthen and is expected to make landfall along the Texas-Louisiana border Aug. 27. Several major refineries, totaling roughly 2.34 million b/d of capacity, were closing their plants, including the largest refinery in the US -- Motiva's Port Arthur Refinery with a 630,000 b/d refining capacity.

"The hurricane threat has been, as usual, bullish for oil prices. Still, the rally turns choppy and unsure when approaching five-month high levels," said Stephen Innes, chief global markets strategist at AxiCorp, in a note Aug. 27.

While the Brent marker has traded in a tight range around the $45/b level in previous weeks, possible supply risks from Hurricane Laura has pushed the October contract comfortably above its resistance level of $45/b in the last three days while WTI has also settled above $43/b.

Meanwhile, US commercial crude inventories fell 4.69 million barrels at 507.76 million barrels for the week ended Aug. 21, showed data released Aug. 26 by the US Energy Information Administration. Notably, this was the fifth consecutive week of drawdown in supplies, largely due to a 60% surge in weekly exports from the week prior to a 15-week high of 3.36 million b/d.

Total gasoline inventories also declined 4.58 million barrels at 239.8 million barrels while total product supplied, a proxy for demand, jumped 2.46 million b/d at 19.62 million b/d.

However, rising COVID-19 cases worldwide, especially a jump in infection cases in Europe, continue to weigh down heavily on market sentiments. The global COVID-19 case count has exceeded 24 million and daily infections have started edging upward from a one-week low of 216,894 cases on Aug. 23 to 241,961 cases on Aug. 25, showed latest data from Johns Hopkins University.

"Still, investors seem willing for now to look through the short-term negatives to remain focused on the positive medium-term fundamentals even beyond the storm surge induced bullish price action," Innes added.