Crude oil futures dip as market consolidates after recent gains

Crude oil futures were lower in mid-morning Asian trade Jan. 14 as oil markets took a breather after recent gains, while data showed global mobility continuing to recover in a sign that oil demand remained resilient.

At 10:05 am Singapore time (0205 GMT), the ICE March Brent futures contract was down 31 cents/b (0.37%) from the previous close at $84.16/b, while the NYMEX February light sweet crude contract fell 44 cents/b (0.54%) at $81.68/b.

Oil prices appeared to have lost their upward momentum after gains of close to 6% earlier in the week. The Relative Strength Index on the daily and four-hourly charts for both crude oil benchmarks showed prices hovering near overbought territory, indicating they might be ripe for profit-taking.

Nonetheless, despite slight overnight losses, the front month ICE Brent and NYMEX light sweet crude contracts remained on track for a fourth straight week of gains, having added 15.1% and 16.6% in value, respectively, over this period.

"The benchmark crude lost 0.2% overnight, with most of the losses coming from late US trading after [US Federal Reserve governor Lael] Brainard spoke of a possible March rate hike. We expect volatility to remain [heightened] in the immediate near term," OCBC Treasury Research analysts said in a note Jan. 14.

Google data showed oil demand markers in most of the world's biggest oil-consuming countries rising from seasonal, year-end lows.

Mobility in 13 countries representing about half of global oil demand averaged 18.7% below pre-COVID-19 levels in the week to Jan. 10, according to adjusted Google mobility data, up from a low of 25% below on Jan. 6. The current activity level also compares with 33% below pre-COVID levels during the same week in 2021.

Meanwhile, cash differentials and inter-month spreads for refined products both in the East and West have surged to multi-year highs in recent days, in a sign of tightening stock levels and underlying pent-up demand.

Cash differentials for European jet fuel cargoes and barges are back at pre-pandemic levels, while in Asia, the backwardation in the prompt month spreads for jet fuel/kerosene and gasoil were at highs not seen since Sept. 2019, Platts data showed.

"Market sentiment remains buoyant amid increasing oil supply pressure and falling inventories. Backwardation is steepening for WTI and Brent due to recent supply disruptions," ANZ Research analysts said in a Jan. 14 note.

"While Asian traffic levels are slowing and the number of flight cancellations have increased, overall demand looks resilient against Omicron spread," they added.

On the supply side, oil-directed rigs in the US was seen jumping by 13 to 707, energy analytics and software company Enverus said Jan. 13