Crude oil futures edge higher on bargain hunting following overnight slide

0243 GMT: Crude oil futures ticked slightly higher during mid-morning trade in Asia Aug. 3 as investors sought to take advantage of lower prices following an overnight plunge, with a weaker US dollar providing further impetus to buy.

At 10:43 am Singapore time (0243 GMT), the ICE October Brent futures contract was up 9 cents/b (0.12%) from the previous close at $72.98/b, while the NYMEX

September light sweet crude contract was 13 cents/b (0.18%) higher at $71.39/b.

The front-month ICE Brent and NYMEX light sweet crude markers had fallen 3.34% and 3.63% respectively on Aug. 2, as coronavirus fears tightened their grip on the market.

An increase in COVID-19 infections in several countries, driven by the highly transmissible delta variant, has brought back the specter of tighter and protracted lockdowns.

The market was rattled by outbreaks in the oil-consuming behemoth China, where millions of people have been placed under lockdown to curb rising infection numbers. Elsewhere, and especially in unvaccinated countries, the situation also looks grim.

"The short-term drivers are all negative: Brisbane's lockdown was extended, the CDC raised South Korea's travel advisory status one notch to Level 2, infections are spreading across China and the overall theme across much of Asia is for more restrictive measures," Edward Moya, senior market analyst at OANDA said in a note.

However, some investors saw the overnight price fall as an opportunity to snap up crude oil contracts at a lower price, believing that oil demand can weather the pandemic storm. Analysts shared this belief, noting that at least for now, demand does seem to be holding up.

"The market should be comforted by data in other Asian countries that show rising cases haven't impacted demand," ANZ analysts said in an Aug. 3 note.

"Mobility data shows increased travel in India as it emerges from recent restrictions. Japan has also seen more traffic, despite rising cases and calls for Tokyo's state of emergency to be widened," they added.

Demand is also expected to have defied a rise in COVID-19 cases in the US, with analysts surveyed by S&P Global Platts expecting crude inventories to have declined by 4 million barrels in the week ended July 30. The analysts also expected gasoline and distillate inventories in the country to haven fallen by 1.1 million barrels and 600,000 barrels respectively over the same period.

Weekly reports on US inventory levels by the American Petroleum Institute and the Energy Information Administration are due for release later Aug. 3 and Aug. 4 respectively.

Crude futures also received some respite in mid-morning trade in Asia from the dollar, which has followed US Treasury yields lower, making dollar-denominated assets such as oil cheaper for buyers holding foreign currency. At 10.35 am Singapore time, the ICE Dollar Index was trading at 92.05, down 0.16% from the July 30 settle.