Crude oil futures tick higher on bargain hunting, but pandemic concerns remain

0318 GMT: Crude oil futures ticked higher during mid-morning trade in Asia Aug. 10 on bargain hunting following an overnight plunge, but rising COVID-19 case numbers continued to sap market sentiment.

At 11:18 am Singapore time (0318 GMT), the ICE October Brent futures contract was up 18 cents/b (0.26%) from the previous close at $69.22/b, while the NYMEX September light sweet crude contract was 36 cents/b (0.54%) higher at $66.84/b.

The markers had settled 2.35% and 2.63% lower Aug. 10 as the rapid spread of the delta variant of the coronavirus raised fears of further demand destruction.

An uptrend in COVID-19 infection numbers in oil-consuming behemoths China and the US were of particular concern to the market. China is battling its biggest outbreak of the coronavirus since it emerged in Wuhan in 2019.

Analysts at St. George Economics said in an Aug. 10 note that the pandemic resurgence has exacerbated concerns over China's economy that had arisen earlier due to global supply bottlenecks and higher raw material costs, and cautioned that lower domestic economic activity could weigh on oil and energy demand.

Crude oil prices were also pressured overnight by a stronger dollar buoyed by a rise in Treasury yields after the release of a better-than-expected US non-farm payrolls report and hawkish comments from some members of the Federal Reserve. At 11:06 am, the ICE Dollar Index was trading at 92.98, up 0.194% from the Aug. 6 close.

However in an Aug. 10 note, ING's head of commodities strategy Warren Patterson and senior commodities analyst Wenyu Yao said that further downside in oil prices may be limited as a sustained fall in oil prices would catch the attention of the OPEC+ coalition, which may then reconsider its current plan to gradually bring more oil back into the market.

"We are of the view that further weakness provides a good buying opportunity, particularly when you consider that the market is set to see significant inventory draws this year (2022 is expected to be more balanced)," they said.

Analysts surveyed by S&P Global Platts expect an uptick in refinery utilization to have pushed US crude stocks down 600,000 barrels in the week ended Aug. 6, and downstream gasoline and distillate stocks to have fallen by 2.4 million barrels and 600,000 barrels, respectively. Weekly inventory reports by the American Petroleum Institute and the Energy Information Administration are due for release later Aug. 10 and Aug. 11, respectively.

The market will also be looking to the International Energy Agency and the OPEC's monthly oil market reports due Aug. 12 for further cues.