Crude oil futures in consolidation mode as investors weigh bearish EIA report

Crude oil futures were in consolidation mode in mid-morning Asian trade July 14 as investors digested bearish US inventory and demand data released overnight as well as a report showing that US inflation was still running hot.

At 10:10 am Singapore time (0210 GMT), the ICE September Brent futures contract was down 1 cent/b (0.01%) from the previous close at $99.56/b, while the NYMEX August light sweet crude contract was 7 cents/b (0.07%) lower at $96.23/b.

Both markers ended the overnight session June 13 mostly unchanged as investors waited on the sidelines after a sharp 7% plunge the prior day, with the wait-and-see mode carrying over into the new June 14 Asian session.

Latest Energy Information Administration data showed total US gasoline inventories climbed 5.83 million barrels on the week to 224.94 million barrels in the week to July 8, leaving stocks 5.7% behind the five-year average for this time of year.

The build comes as total product supplied for gasoline, EIA's proxy for demand, plunged 14% to a six-month low at 8.06 million b/d. It was the largest one-week decline in implied gasoline demand since the week ended Dec. 31, and left demand nearly 13% below normal.

Distillate stocks meanwhile rose 2.67 million barrels over the same period to 113.8 million barrels, while commercial crude oil stocks climbed 3.25 million barrels to 427.05 million barrels.

However, after stripping out changes in the US strategic petroleum reserve, total US crude oil stocks were down 3.62 million barrels at an 18-year low of 912.2 million barrels.

"Overall, the report was fairly bearish for the market," ING's Head of Commodities Strategy Warren Patterson said in a July 14 note.

Inflation

Overnight also saw the release of the latest US consumer price index from the US Labor Department that showed inflation in June jumping 9.1% year on year, a rise not seen in 40 years.

Traders are now pricing in an outsized 100 basis points hike in the US Federal Reserve's key Fed Funds rate in its meeting later this month, according to CME group data.

The latest inflation print will likely spur a further strengthening in the US dollar, while also heightening concerns of a recession.

"Increased recession risks in the near-term as a tradeoff for more aggressive tightening could remain at the forefront of sentiments," said IG market strategist Yeap Jun Rong.

However, analysts were hopeful that US inflation was nearing its peak.

"We are hopeful that this marks the peak for headline inflation, especially with gasoline prices down around 5% from their June peak, but we can't rule out another supply shock," said ING's Chief International Economist James Knightley in a late June 13 note.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia July 14 from the previous close.

The September Dubai swap was pegged at $89.21/b at 10 am Singapore time (0200 GMT), down 54 cents/b (0.6%) from the July 13 Asian market close.

The August-September Dubai swap intermonth spread was pegged at $2.99/b at 10 am, down 29 cents/b over the same period, and the September-October intermonth spread was pegged at $2.28/b, down 16 cents/b.

The September Brent/Dubai EFS was pegged at $10.36/b, down 39 cents/b.