OIL FUTURES: Crude lower on bearish supply, demand factors

Singapore — 0240 GMT: Crude oil futures were lower in mid-morning trade on Sept. 4 as market sentiment was weighed down by the risk of rising global supply amid a muted demand outlook.

At 10:40 am Singapore time (0240 GMT), ICE Brent November crude futures were down 41 cents/b (0.93%) from the Sept. 3 settle to $43.66/b, while the NYMEX October light sweet crude contract was down by 41 cents/b (0.99%) at $40.96/b.

"After four months of low volatility and relatively stable melt-up in oil prices, action over the past 24 to 48 hours has been a curious one amid US Energy Information Administration inventory statistics that, on the face of it, were even more supportive than the earlier American Petroleum Institute's data -- albeit with the caveat that the hurricane Laura has had a significant impact," Stephen Innes, chief global markets strategist at AxiCorp, said in a note Sept. 4.

US commercial crude inventories declined by a larger-than-expected 9.4 million barrels for the week ended Aug. 28, but this was offset by a bearish 4.1% drop in total finished motor gasoline supplied to 8.79 million barrels, EIA data showed Sept. 2.

A seasonal drop off in gasoline demand at the end of the US driving season as well as the start of scheduled refinery maintenance, and continued weakness in global refining margins are likely to further contribute to a drop in refinery runs and demand for crude, analysts said.

At 10:40 am Singapore time (0240 GMT), NYMEX October RBOB stood at $1.1975/gal, down 0.61% from $1.2049/gal at the close on Sept. 3.

On the supply front, Iraq's oil exports slipped to a five-year low of 3.02 million b/d in August, S&P Global Platts reported earlier. While the Iraqi oil ministry has not yet reported August production numbers, the lower export figures suggest an improving compliance with OPEC+ production cuts.

However, the market became concerned about the risk of higher global supply after the country's oil minister, Ihsan Ismaael, said that Iraq will request for two additional months to compensate for earlier overproduction, in the OPEC+ monitoring committee meeting on Sept. 17.

"In addition to the refinery maintenance period and end of the driving season that will be weighing on oil demand in September, perhaps spooking the markets, even more, were the reports that Iraq was getting wobbly on its commitments under the OPEC+ agreement. The market, rightly, is intensely focused on the continuing effectiveness of this deal," Innes added.

Iraq has previously pledged to make extra compensation cuts of 400,000 b/d in August and September to make up for earlier overproduction, indicating an effective production quota of 3.404 million b/d for these two months.