OIL FUTURES: Crude higher on rising geopolitical risks, stronger China services activity

Crude oil futures rose in midmorning trading in Asia on Aug. 5, driven by rising geopolitical tensions in the Middle East and an expansion in China's services activity.

At 11:43 Singapore time (0343 GMT), the October ICE Brent crude oil futures contract increased 30 cents/b, or 0.39%, to $77.11/b, while the September NYMEX light sweet crude contract gained 21 cents/b, or 0.29%, to $73.73/b.

The assassination of Hamas leader Ismail Haniyeh in Tehran has stoked fears of an all-out war with Israel, as Iran vowed to retaliate.

"Geopolitical risks continue to hang over the oil market. Participants are waiting to see how Iran responds to the assassination of the political leader of Hamas on Iranian soil," said ING Strategists Warren Patterson and Ewa Manthey.

The expansion of China's service economy accelerated entering the second half of 2024. The seasonally adjusted headline Caixin China General Services Business Activity Index rose to a reading of 52.1 in July, from an eight-month low of 51.2 in June.

China's contracting official manufacturing Purchasing Managers' Index and weaker US economic data have raised worries about the health of the global economy, leading to slowing crude oil demand concerns.

"According to our estimate, there is a $4-$5/b sentiment discount driven by macro concerns currently reflected in the oil price," said Commodity Insights analysts.

China's manufacturing PMI edged down 0.1 point to 49.4 in July, National Bureau of Statistics data showed. In the US, the Institute for Supply Management's July manufacturing purchasing managers' index fell for a fourth straight month to 46.8% in July, down 1.7 percentage points from 48.5% in June.

The manufacturing sector represents about 11% of the US economy and 26% of China's economy, according to World Bank estimates.

Dubai swaps

Dubai crude swaps and intermonth spreads weakened in midmorning trading in Asia on Aug. 5.

The October Dubai swap was pegged at $75.21/b at 10 am Singapore time (0200 GMT), narrowing $3.06/b, or 3.9%, from the Aug. 2 Asian close.

The September-October Dubai swap intermonth spread was pegged at 57 cents/b at 10 am Singapore time, narrowing from 62 cents/b on Aug. 2, and the October-November intermonth spread was pegged at 35 cents/b, narrowing 10 cents/b from the previous session.

The October Brent-Dubai exchange of futures for swaps was pegged at $1.76/b, widening 6 cents/b on the session.