Crude oil futures extend losses amid US gasoline stock build, poor demand outlook

Crude oil futures extended losses sustained overnight during mid-morning Asian trade Aug. 19, as concerns over the slowdown in oil demand intensified after US data showed a build in US gasoline stockpiles, while investors remained spooked by the delta variant spread.

At 10:32 am Singapore time (0232 GMT), the ICE October Brent futures contract was down $1.03/b (1.51%) from the previous close at $67.18/b, while the NYMEX September light sweet crude contract fell $1.07/b (1.63%) at $64.39/b.

Total US gasoline inventories climbed 700,000 barrels to 228.17 million barrels in the week ended Aug. 13, the Energy Information Administration data released late Aug. 18 showed, snapping four consecutive weekly draws and narrowing the deficit to the five-year average to around 3%.

The build ran counter to market expectations. American Petroleum Institute data released late Aug. 17 showed US gasoline stocks down 1.2 million barrels, while analysts surveyed by S&P Global Platts on Aug. 16 had called for a 2.3 million-barrel decline over the period.

Coming at the tail end of the peak driving season, the news sent both oil benchmarks slumping 1.1%-1.7% overnight. Reports of a 3.23 million-barrel draw in US commercial crude inventories over the same period to 435.54 million barrels did little to offset investor pessimism.

"It appears that the only modestly bearish data point from yesterday's report was that gasoline inventories increased by 696,000 barrels due to a slight decline in implied demand," ING analysts Warren Patterson and Wenyu Yao said.

"Given yesterday's price action, the market is clearly more focused on the global demand outlook than EIA weekly numbers," they added.

Money managers have been cutting their long exposures to ICE Brent and NYMEX light sweet crude contracts in recent weeks amid growing bearish sentiment, Commitments of Traders reports from the Intercontinental Exchange and the US Commodity Futures Trading Commission showed.

Net long positions in the ICE Brent contract as of Aug. 10 were down 30,319 at 279,346 lots, while for the NYMEX light sweet crude contract, it was down 17,883 at 286,903 lots.

"There are still too many question marks over the crude demand outlook over the next few months and that will weigh on crude prices. The return to the office no longer seems like a certainty and delays in approving vaccines for younger children will likely mean inconsistent demand as the school year starts," OANDA's senior market analyst Edward Moya said.

COVID-19 case numbers in the US remained stubbornly high despite the government's ongoing vaccination drive. The country recorded 141,893 new cases as of Aug. 17, most recent data from the US Centers for Disease Control and Prevention showed, while the seven-day moving average stood at 130,121 cases.

Nonetheless, ING's Patterson and Yao noted that one bright spot for the supply outlook was the increasingly unlikely return of Iranian oil in the near term, given the lack of progress in nuclear talks.

"The IAEA recently warned that Iran had increased uranium enrichment activity, so a nuclear deal still looks some distance away, and as a result, the lifting of oil sanctions as well," they said.