Crude falls after rising overnight on strong US economic data, global demand

Singapore — 0244 GMT: Crude oil futures fell in midmorning trade in Asia June 30 after climbing overnight June 29 on better-than-expected US economic data and rising global demand.

At 10:44 am Singapore time (0244 GMT), ICE August Brent crude futures was down 21 cents/b (0.50%) from the June 29 settle at $41.50/b, while the NYMEX August light sweet crude contract was down 27 cents/b (0.68%) at $39.43/b.

The National Association of Realtors, or NAR, reported June 29 that US pending home sales for May rose 44.3% month on month after two previous months of declines. This is the highest month-over-month gain in the index, and beats the 19.3% gain expected in a Bloomberg survey of economists, according to media reports.

"This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery," according to Lawrence Yun, NAR's chief economist, in the same report.

Meanwhile, rising refinery demand and an expected surge in exports likely weighed on US crude supply in the week ended June 27, according to analysts.

Commercial US crude stocks are expected 2.7 million barrels lower on the week at around 538 million barrels, analysts surveyed by S&P Global Platts said. The drawdown would snap three successive weekly builds that each pushed inventories to fresh all-time highs, largely due to an uptick in crude exports amid cheaper VLCC freights and rising margins for US crude abroad.

"The cyclical data globally continues to point to a robust reopening narrative and remains one of the primary bullish price tenets beyond OPEC+ unwavering compliance. Suggesting that that oil prices are supported by real demand, not just OPEC+ production cuts and the compensation principle — implying that both supply and demand curves will continue to move in opposite but bullish directions," said Stephen Innes, chief global markets analyst at AxiCorp, in a note June 30.

Total US gasoline demand is also expected to have climbed around 2% during the week ended June 27, according to S&P Global Platts Analytics data.

"However, the market is holding its breath as it looks ahead to the key 4 July holiday, where increased travel is expected. A reluctance of consumers to hit the roads could dent expectations of a recovery in demand for gasoline during the US summer," ANZ analysts said in a note June 30.

Meanwhile, coronavirus cases continued to surge in the US and other parts of the world. Texas Governor Greg Abbot ordered on June 26 for bars to close and restaurants to operate at 50% capacity while his counterpart in Arizona, Doug Ducey, has also ordered public schools to delay the start of classes at least until Aug. 17, according to media reports.

"Perhaps the two most important questions to consider on the last day of the quarter will be whether the data optimism will sustain and if the COVID-19 spread will further ravage the global economy moving into H2," said Pan Jingyi, market strategist at IG, in a note June 30.

Market participants will look to fresh cues from the inventory report by the American Petroleum Institute and the US Energy Information Administration, due later June 30 and July 1, respectively.