NYMEX crude retakes $100/b after overnight plunge on demand concerns

Crude oil futures were higher in mid-morning Asian trade May 11 amid investor dip-buying, with the NYMEX marker moving back above $100/b after plunging for a second session overnight on persisting demand concerns.

At 10:18 am Singapore time (0218 GMT), the ICE July Brent futures contract was up $1.46/b (1.42%) from the previous close at $103.92/b, while the NYMEX June light sweet crude contract was $1.29/b (1.29%) higher at $101.05/b.

After two days of steep declines that took the front-month NYMEX crude contract below $100/b, sentiment was starting to turn as investors look past the recent bearish headlines and focus back on fundamentals.

Analysts said that while recession fears and concerns over demand loss remained at the forefront, oil markets nonetheless remained tight, with the OPEC+ producer group failing to meet production targets and Russian oil exports severely curtailed due to the Ukraine war.

"WTI crude tentatively fell below the $100/b level, but energy traders won't forget how tight the oil market is and also how prices will react when the EU is able to get sanctions on Russian oil pushed through," said OANDA senior market analyst Edward Moya in a May 11 note.

Nigeria, Africa's largest oil producer, was currently losing 350,000-400,000 b/d due to "oil theft and a lack of investments," an oil ministry spokesperson told S&P Global Commodity Insights May 10.

Nigeria has seen its crude and condensate production drop below 1.5 million b/d this year even though it has the capacity to pump over 2.1 million b/d, as the country faces a slew of security, operational and technical problems.

US fuel prices spike

Fuel prices in the US meanwhile hit record highs this week, spurring concerns of demand destruction. The AAA reported that the national average for unleaded gasoline hit a record $4.374/gal May 10, with diesel also at a new high of $5.50/gal.

While gasoline gets most of the attention in the US -- especially nearing the busy summer driving season -- diesel is considered the workhorse of the global economy.

The American Petroleum Institute May 10 reported a 1.62 million-barrel build in US crude oil inventories for the week ended May 6. Gasoline inventories rose by 823,000 barrels in the week, while distillate stocks rose by 662,000 barrels in the API data.

"If today's [Energy Information Administration] report shows similar numbers, it would be the first weekly increase for US gasoline inventories since late March and the first for distillates since early April," said ING analysts Warren Patterson and Wenyu Yao in a note.

"However, the middle distillate market is still very tight and so we would expect US heating oil cracks to remain well supported. In fact, middle distillate cracks around the world should remain well supported, given the tightness in the market and concerns over Russian gasoil exports," they added.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia May 11 from the previous close.

The July Dubai swap was pegged at $96.10/b at 10 am Singapore time (0200 GMT), down $2.19/b (2.23%) from the May 10 Asian market close.

The June-July Dubai swap intermonth spread was pegged at $2.09/b at 10 am, down 21 cents/b over the same period, and the July-August intermonth spread was pegged at $1.46/b, down 29 cents/b.

The July Brent/Dubai EFS was pegged at $7.81/b, down 73 cents/b.