Crude oil futures steady amid softening demand outlook, supply uncertainties

0224 GMT: Crude oil futures were steady during mid-morning trade in Asia July 13, with market sentiment bogged down by a resurgence of COVID-19 cases across the globe that could slow economic recovery, while the OPEC+ alliance remained unable to reach a consensus on reducing production cuts for August and beyond.

At 10:24 am Singapore time (0224 GMT), the ICE September Brent futures contract was up 16 cents/b (0.21%) from the previous close to $75.32/b, while the NYMEX August light sweet crude contract was up 17 cents/b (0.23%) at $74.27/b.

"Oil looks like it is stuck between opposing forces -- on one hand, there is the slowing down of recovery, particularly in Asia, and on the other hand, there are expectations that OPEC+ will come up with a [production] deal to maintain prices," Jeffery Halley, senior market analyst at OANDA, told S&P Global Platts July 13.

Concerns of softening demand weighed on market sentiment after data from the US showed a spike in COVID-19 cases in the week ended July 11, reflecting that the path to demand recovery may not be smooth sailing.

"The robust crude demand outlook is starting to take a hit as many countries continue to struggle with the more infectious Delta variant. Even the US is seeing a surge as low vaccinated states are behind the 47% increase in cases over the previous week," said Edward Moya, senior market analyst at OANDA in a July 13 note.

Furthermore in Asia, countries continue to implement lockdown measures to combat the resurgence of the virus, further dampening the global demand outlook for the near term.

"Japan, South Korea and Vietnam all introduced measures to try and curb the spread of the Delta variant," said analysts from ANZ in a July 13 note.

In the UK, rising counts of COVID-19 cases are casting a shadow over the optimism surrounding the re-opening of the country, which is expected to continue as planned on July 19.

"England will end lockdown rules on July 19 even though they might see a surge in infections leading to 1,000 to 2,000 people being admitted to the hospital daily till the peak in August," noted Moya. "This pandemic once again feels far from over and that is dragging down optimism for a robust crude demand story going forward."

Meanwhile, the OPEC+ alliance remains unable reach an agreement on the reduction on production cuts for August and the months ahead, resulting in the bloc defaulting to sticking to current production quotas that could result in oil supply tightness, providing some support to prices.

"There's little sign that Saudi Arabia and the UAE have made progress in resolving a dispute on how their production cuts are measured. Both have already advised buyers that quotas will not change for August," said ANZ analysts.

The market will continue to look forward to inventory data releases from the US Energy Information Administration and the American Petroleum Institute this week, due for release on July 14 and July 15. In addition, the market will look out for the International Energy Agency and OPEC's monthly oil market reports, due to be released later on July 13 and July 15, respectively.