Crude oil futures higher amid bargain hunting, supply risks remain

Singapore — Crude oil futures moved higher during mid-morning trade in Asia Thursday on mild bargain-hunting after Wednesday's sell-off that saw markers fall by more than $2/b, while analysts warned that supply concerns persist although immediate risk has cooled.

At 10:48 am Singapore time (0248 GMT), the front-month March ICE Brent crude futures rose 51 cents/b (0.78%) from Wednesday's settle at $65.95/b, while the NYMEX February light sweet crude contract was 52 cents/b (0.87%) higher at $60.13/b.

On Wednesday, both international benchmarks lost more than 4% during Wednesday's trading session as US President Donald Trump appeared to soften his stance toward Tehran, reducing the risk of an immediate US response to Iranian missile strikes on US bases in Iraq overnight.

"Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world," Trump said. "No American or Iraqi lives were lost because of the precautions that were taken."

"The surprising lack of retaliation post the weekend threats from the President were evidently taken well by the market, returning investors to the positive conditions prior to the breakout of this issue," IG's market strategist Pan Jingyi said.

Furthermore, OPEC+ officials said Wednesday they see no need to reverse their current production cuts in the face of heightened geopolitical tensions in the Middle East, soothing tensions around supply disruptions.

While this helped prices lose most of their risk premium gained from earlier in the week, mild bargain-hunting and an underlying uncertainty in geopolitics in the Middle East pushed prices higher during Asian trade Thursday, analysts said.

S&P Global Platts Analytics expects Brent to be capped in the high-$60s/b unless a supply disruption materializes, given Iran's aversion to a direct conflict and seasonal market weakness in the coming months.

"Still oil prices should find support from the more pedestrian views around the trade deal, while the geopolitical risk premium should continue to underpin sentiment, " Stephen Innes, chief Asia market strategist at AxiTrader, said in a note Thursday.

"Conditions remain ripe for a supply disruption from a terrorist attack given the anti-US attitude that continues to run thick along Iran's crescent of influence," he added.

Elsewhere, US Energy Information Administration on Wednesday released its weekly US inventory data, which showed that US crude stocks for the week ended January 3 rose 1.16 million barrels to 431.06 million barrels.

The build ran counter to both analyst expectations of a 3.7-million barrel decline, and historic end-of-year crude draws reported by EIA.

As of 0248 GMT, the US Dollar Index was down 0.06% at 96.975.

--Avantika Ramesh, avantika.ramesh@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com