Crude rangebound as positive vaccine news outweighs surge in virus cases

Singapore — 0227 GMT: Crude oil futures were rangebound in mid-morning trade in Asia July 21, as hopes of a potential vaccine for coronavirus helped offset concerns about the rising pandemic cases globally.

At 10:27 am Singapore time (0227 GMT), ICE Brent September crude futures were up 7 cents/b (0.16%) from the July 20 settle at $43.35/b, while the NYMEX August light sweet crude contract was up by 6 cents/b (0.15%) at $40.87/b.

"US and global crude oil prices edged higher on Monday, 20th July, as the optimism from the stock markets also rubbed off on investor's appetite for crude, although the gains were limited as there was still caution on how much more recovery in oil demand there will be from COVID-19," UOB analysts said in a note July 21.

Investors' optimism largely stemmed from promising results of a potential coronavirus vaccine from AstraZeneca and Oxford University, and with multiple vaccine candidates, investors are hopeful that at least one vaccine will be commercially ready in 2021, possibly helping to restore global oil demand closer to 2019 levels, analysts said.

That helped offset the surge in coronavirus cases globally. While total confirmed cases worldwide are still climbing rapidly, the daily new infections has dropped for four consecutive days from a record high of 252,500 on July 16 to 214,600 on July 19, latest data from John Hopkins University showed.

On the supply front, even though OPEC+ has agreed to taper its record production cuts from 9.7 million b/d to 7.7 million b/d -- starting from August on the back of an uptick in demand and recovery in oil prices -- US oil production showed few signs of coming back.

Latest oil rig data from Baker Hughes showed a week-on-week drop in the number of US oil rigs to 182 for the week ended July 17, significantly lesser than the 780 total rig counts a year ago.

Elsewhere, monsoonal rains and flooding in some parts of southern China has reduced domestic refinery run rates, signaling subdued demand.

"Indeed, this brings unwelcome focus to the ongoing problem of high global inventories and could limit the upside for oil even if worries about China's slowing demand turn out to be overblown," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 21.

Market participants are likely to focus on the inventory report by the American Petroleum Institute and the US Energy Information Administration, due later July 21 and July 22, respectively.