Crude oil futures ease ahead of OPEC+ meet on profit-taking, weak China data

Crude oil futures were lower in mid-morning Asian trade Aug. 1 as investors booked profits following outsized gains in the previous week ended July 29, while attention this week is expected to be focused on the upcoming OPEC+ meet.

At 11:00 am Singapore time (0300 GMT), the ICE October Brent futures contract was down 74 cents/b (0.71%) from the previous close at $103.23/b, while the NYMEX September light sweet crude contract fell 94 cents/b (0.95%) at $97.68/b.

The front month ICE Brent crude contract closed the previous week with a 6.6% gain, its best week-on-week gain since early April. Analysts said oil prices were ripe for profit-taking with NYMEX crude prices nearing the $100/b mark again.

Some pressure was seen from China's manufacturing activity data, which showed a contraction in July. The official manufacturing PMI fell to 49.0 last month, down from 50.2 in June, data from the National Bureau of Statistics showed July 31.

"Both new orders and new export orders in the manufacturing PMI were in contraction," ING's Greater China chief economist Iris Pang said in an Aug. 1 note. "This implies both domestic demand and external demand for manufacturing were weak. And another month of manufacturing PMI under 50 is likely."

This week, attention is expected to focus on the OPEC+ meeting to be held Aug. 3. The group is expected to keep output steady for September, having finished reversing its output cuts as of this month.

OPEC+ insiders have said Saudi Arabia, having worked hard to convince Russia to join the alliance in 2016 and stayed through the coronavirus pandemic, is wary of upsetting Moscow too much by acquiescing to Western demands for more crude.

Saudi Arabia and the UAE are wary of using up all their production capacity, which would leave them unable to respond to any major outages in the market and lead to extreme market volatility, they said.

As a result, three OPEC+ delegates told S&P Global Commodity Insights on July 29 that they expected no quota increases to be decided at the Aug. 3 meeting.

"From our vantage point, the OPEC+ meeting doesn't seem likely to rock the boat and be a significant oil price catalyst," SPI Asset Management Managing Partner Stephen Innes said.

While fundamentals are expected to remain supportive for oil prices with supply still tight and demand reportedly holding up, persistent recession fears will likely keep a lid on any large price gains.

Dubai crude swaps were higher in mid-morning trade in Asia Aug. 1 from the previous close, though intermonth spreads were mixexd.

The October Dubai swap was pegged at $94.95/b at 11 am Singapore time (0300 GMT), up 6 cents/b (0.06%) from the July 29 Asian market close.

The September-October Dubai swap intermonth spread was pegged at $2.54/b at 10 am, widening 7 cents/b over the same period, and the October-November intermonth spread was pegged at $1.93/b, down 13 cents/b.

The October Brent-Dubai EFS was pegged at $8.28/b, narrowing 7 cents/b.