Crude oil futures prices consolidate after overnight climb on US draw

Crude oil futures were mostly steady in midmorning trade in Asia Feb. 10 as prices consolidated after draws in US crude oil and refined products stocks last week, while eyes remained on the progress of the Iranian nuclear talks in Vienna.

At 10:17 am Singapore time (0217 GMT), the ICE April Brent futures contract was down 7 cents/b (0.08%) from the previous close at $91.48/b while the NYMEX March light sweet crude contract rose 1 cent/b (0.01%) at $89.67/b.

Oil futures had moved higher overnight after the US Energy Information Administration showed commercial crude stocks declined 4.76 million barrels to 410.39 million barrels in the week ended Feb. 4.

The draw left stocks more than 10% behind the five-year average for this time of the year and at the lowest outright level since October 2018.

Refined products posted counterseasonal draws, with countrywide gasoline stockpiles declining 1.64 million barrels over the period to 248.39 million barrels, and distillate stocks falling 930,000 barrels to 121.81 million barrels.

A drop in crude oil stocks at the NYMEX delivery point of Cushing, Oklahoma, by 2.8 million barrels, its fifth straight week of decline, drew some concern from analysts. Cushing stocks currently stand at an 11-week low of 27.73 million barrels.

"We are getting into territory where there will be concern over hitting tank bottoms. The tightness at the WTI delivery hub has been reflected in the prompt WTI time spread," said ING analysts Warren Patterson and Wenyu Yao in a Feb. 10 note.

The M1-M2 NYMEX crude time spread had briefly widened above $2/b at the start of February, a level it last saw in July 2018. The spread has since eased to settle at $1.13/b as of Feb. 9.

Investors were looking toward the outcome of talks between Iran and world powers currently happening in Vienna on the possible return of Iranian oil.

A resolution looked increasingly likely, with US officials saying earlier in the week that a deal was "in sight," while Iranian Foreign Ministry spokesperson Saeed Khatibzadeh said "significant progress" has been made.

An interim deal could potentially increase exports by 700,000 b/d, according to S&P Global Platts Analytics.

Nonetheless, most analysts expected the near-term move for oil prices to remain upward. Supply is expected to remain tight for the remainder of the first quarter, though that tightness is expected to ease going into the next quarter.

Mike Muller, the head of Vitol Asia, said in a Feb. 6 podcast that Iranian crude was needed to temper the oil price rally and cater to increasing demand, adding that the consensus was that a deal would be reached.

"Without exception every investment banker, every advisory consultant, every oil major, they all have a view that Iranian oil will be back this year," said Muller.