Crude futures rise in Asia trade after sharp fall in US inventories

New York — 0200 GMT: Crude oil futures were trading higher in mid-morning trade in Asia July 1 after a significant draw in US crude oil inventories, and despite an increase in coronavirus cases clouding the demand outlook.

At 10:25 am Singapore time (0225 GMT), new front-month ICE Brent September crude futures were up 45 cents/b (1.09%) from the June 30 settle at $41.72/b, while the NYMEX August light sweet crude contract was 53 cents/b (1.35%) higher at $39.80/b.

"The American Petroleum Institute survey estimated a significant draw in crude oil inventories of 8.156 million barrels for the week ending June 26, which was much higher than analysts' guesses," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 1.

Market participants will look to more definitive US Energy Information Administration data due for release later in the day to confirm these estimates.

"The reports could go a long way to easing some of those lingering inventory concerns. And possibly there is enough oomph in [the API] announcement to trigger a retest of the psychologically important WTI $40/b before [the] EIA release," Innes added.

Meanwhile, rising coronavirus cases in some US states continue to weigh heavily on market sentiment, capping any strong recovery in crude prices in the short term.

Coronavirus cases more than doubled in 14 US states in June, including California, Florida and Texas, according to media reports. White House infectious disease expert Anthony Fauci told a Senate hearing June 30 that new cases could more than double to 100,000/day unless a full nationwide effort was undertaken, according to media reports.

"This has seen the EU extend its travel ban on US citizens. Within the US, states stalled the easing of restrictions. New York extended its list of states from which visitors must quarantine on arrival. Sentiment wasn't helped by signs that supply may be on the rise," ANZ analysts said in a note July 1.

ConocoPhillips said June 30 it will start increasing producing in July after announcing some of the biggest North American production cuts in the second quarter, with 460,000 boe/d curtailed in June. The company said it will begin by restoring its Lower-48 US production and its Alaskan production in July, followed by its Surmont volumes in Canada later in the third quarter.

"Brent ended Q2 with gains of 21%. It has been an eventful Q2 for crude oil, with WTI plunging into negative price territory briefly and OPEC+ enacting the largest output reduction in its history. In Q3, we think oil prices may continue to rise, but at a much slower pace than Q2. The path to recovery is unlikely to be smooth or linear," OCBC analysts said in a note July 1.