Crude retreats after overnight rally, traders await fresh drivers

Singapore — 0130 GMT: Crude oil futures were slightly lower in mid-morning trade in Asia on Aug. 13, as traders paused for fresh cues after an overnight rally on a larger-than-expected drawdown in US commercial crude inventories.

At 09:30 am Singapore time (0130 GMT), the ICE Brent October crude futures were down 10 cents/b (0.22%) from the Aug. 12 settle at $45.33/b, while NYMEX September light sweet crude contract was down by 8 cents/b (0.19%) at $42.59/b.

US commercial crude inventories fell 4.51 million barrels to 513.08 million barrels for the week ended Aug.7, and narrowed the surplus to the five-year average to about 15%, US Energy Information Administration data released Aug. 12 showed.

Meanwhile, total gasoline stocks also moved 720,000 barrels lower to 247.08 million barrels while nationwide distillate stocks fell by 2.32 million barrels to 177.66 million barrels for the previous week, snapping three consecutive weeks of builds.

"Oil prices appear to be in the right spot, possibly poised to take the next step higher and forge a new trading range above Brent $ 45.00 after US crude stocks fell for the third consecutive week and are clearly on a downwards trajectory," Stephen Innes, chief global markets analyst at AxiCorp, said in a note Aug. 13. "And with product stocks decreasing, favorably for global oil prices, it suggests the demand recovery is continuing to grind higher."

Elsewhere, OPEC, in its monthly oil market report released on Aug. 12, revised down its projection of global demand by almost 100,000 b/d to 90.63 million b/d for 2020, citing the "lower economic activity levels in a few major non-OECD countries" as the cause. Global oil demand for 2021 was unchanged at 97.63 million b/d.

The forecasts are in a slight contrast to the US EIA's Short-Term Energy Outlook released a day earlier on Aug. 11, where the EIA raised its outlook for global oil demand by 250,000 b/d from last month's forecast to 93.14 million b/d for 2020 and by 280,000 b/d to 100.16 million b/d for 2021.

This highlights the heightened level of uncertainty in the short term demand outlook for oil, especially as COVID-19 daily cases worldwide remain high and a potential second wave remains a lingering concern.

"Global COVID-19 cases now exceed 20 million, so in the absence of a meaningful progress on a COVID-19 vaccine, traders are still looking over their shoulder to where new lockdowns might be necessary," Innes added.

Market participants will look for further cues on the outlook of the global crude complex from the International Energy Agency's monthly oil market report scheduled for release later Aug.13.