OIL FUTURES: Crude price holds steady as demand expectations cap gains

Crude oil futures hung on to early gains through midafternoon Asian trade Aug. 6 after a volatile trading session though analysts warned that prevailing demand concerns are likely to cap gains.

At 3:15 pm Singapore time (0715 GMT), the ICE October Brent futures contract was up 41 cents/b (0.54%) from the previous close at $76.71/b, while the NYMEX September light sweet crude contract rose 57 cents/b (0.78%) at $73.51/b.

Global financial markets attempted to stabilize after a volatile start to the week that saw a broad move away from risk assets such as oil futures.

"It seems we've caught a brief respite as some of the falling knives have finally hit the floor," said SPI Asset Management's managing partner, Stephen Innes.

The rebound Aug. 6 was broadly attributed to supply-side concerns following the shutdown of Libya's largest oilfield and geopolitical developments in the Middle East.

Resilient US services data overnight also offered some support for prices and bolstered a broad-based recovery in risk sentiment, IG's market analyst, Yeap Jun Rong, told S&P Global Commodity Insights.

"Oil prices have been attempting to stabilize from recent rout ... but that is weighed against geopolitical developments in the Middle East, where initial retaliation from Hezbollah has been more contained than what some expect," he continued.

"For now, concerns around US growth risks are eased by resilience in US services activities, but it may have to take more to reassure markets of a stronger global demand outlook for oil. Until then, gains in oil prices may seem more limited."

Overarching worries over demand from China, the world's largest importer of crude, continued to cap gains to crude prices, ING's commodity analysts said Aug. 6.

"Investors have been exiting commodities in recent weeks, highlighted in positioning data and this has continued in recent days," they added, noting a steady decline in open interest in ICE Brent futures contracts since mid-June that reflected a souring speculative appetite.

Investors await China's trade data due Aug. 8 which will be the next key Asian economic data point this week for commodity markets.

The country's crude inflows had slipped 10.8% on the year in June with poor refining margins and soft refined product demand said to cap gains through July, sources said.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in midafternoon Asian trading Aug. 6 from the previous close.

The October Dubai swap was pegged at $75.13/b at 2 pm Singapore time (0600 GMT), up $1.29/b (1.75%) from the previous Asian market close.

The September-October Dubai swap intermonth spread was pegged at 43 cents/b, down 2 cents/b over the same period, and the October-November intermonth spread was pegged at 31 cents/b, up 1 cent/b.

The October Brent-Dubai exchange of futures for swaps was pegged at $1.93/b, up 11 cents/b.