OIL FUTURES: Crude down on high US stock build, poor demand signals

Crude oil futures were lower in mid-afternoon Asian trade Feb. 12, driven by a larger-than-expected increase in US crude oil inventories, heightening downside risks.

At 2:58 pm Singapore time (0658 GMT), the ICE April Brent futures contract was down 23 cents/b (0.30%) from the previous close at $76.77/b, while the NYMEX March light sweet crude contract was down 24 cents/b (0.33%) from the previous close at $73.08/b.

Supply-side risks faded following a larger-than-expected increase in US crude oil inventory levels.

US crude oil inventories surged by 9.043 million barrels in the week ended Feb. 7, data from the American Petroleum Institute showed late Feb. 11.

The latest reading followed a 5.025 million barrel increase in the previous week, and far exceeded the market's expectations of a 2.8-million-barrel build—possibly indicating diminished demand for crude oil, too.

More definitive data will be released by the Energy Information Administration later in the global day Feb. 12.

Further adding to downside risks in crude oil futures prices, OPEC+ crude production in January was estimated to have edged up on the month.

OPEC+ crude production in January rose slightly month over month, as countries with quotas continued to struggle to meet their targets, the latest Platts OPEC+ Survey from S&P Global Commodity Insights showed Feb. 11.

Should Brent crude oil futures prices fall through the previous week's low at $73.94/b, the derivative may see trading at the $73/b region, Axel Rudolph, market analyst at IG said.

"The freshly breached 50-[daily moving average] could act as a short-term support for a further extension of the gains in the short run, but we may see a strong resistance approaching the $74.50/b mark, near the 200-DMA and the major 38.2% Fibonacci retracement on the latest selloff," Ipek Ozkardeskaya, senior analyst at Swissquote Bank said.

Still, losses in crude oil prices may be capped as geopolitical tensions continue to simmer amid the current hostage exchange standstill.

Israeli Prime Minister, Benjamin Netanyahu, said early Feb. 12 on X, formerly Twitter, that "If Hamas does not return our hostages by Saturday noon [10:00 GMT], the ceasefire will end, and the [Israel Defense Forces] will resume intense fighting until the final defeat of Hamas."

Crude oil futures prices may also face upside risks amid signs of tighter Russian supply, analysts said.

All eyes are on the upcoming US consumer price index (CPI) data, slated for release later in the global day Feb. 12.

"Barring any surprises, the data is unlikely to significantly alter rate expectations. Consensus forecasts a 0.3% month-on-month increase in both headline and core inflation, signaling persistent pricing pressures that should support the Fed's cautious stance in the near term," Yeap Jun Rong, market strategist at IG said.

A higher-than-expected inflation rate may support the US dollar, though further tariff threats may continue to complicate the inflation outlook in the world's largest crude oil consumer's economy.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in mid-afternoon Asian trading Feb. 12 from the previous close.

The April Dubai swap was pegged at $76.01/b at 2.45 pm Singapore time (0645 GMT), up by 4 cents/b (0.05%) from the previous Asian market close.

The March-April Dubai swap intermonth spread was pegged at 68 cents/b, narrower by 4 cents/b over the same period, and the April-May Dubai swap intermonth spread was pegged at 69 cents/b, narrower by 4 cents/b over the same period.

The April Brent-Dubai exchange of futures for swaps was pegged at 73 cents/b, unchanged over the same period.