Crude oil falls, but demand outlook remains hopeful

Crude oil futures were lower in mid-morning Asian trade Aug. 25 amid profit-taking after sharp overnight gains.

At 11:30 am Singapore time (0330 GMT), the ICE October Brent futures contract was down 47 cents/b (0.66%) from the previous close at $70.58/b, while the NYMEX October light sweet crude contract fell 44 cents/b (0.65%) at $67.10/b.

"The oil market is still very tight, and with Chinese demand picking up, crude prices only have one way to go after an overdone selloff from the recent gains," OANDA's senior market analyst Edward Moya said Aug. 25.

Han Tan, chief market analyst with Exinity Group, told S&P Global Platts Aug. 25 that oil prices seem to be taking a slight breather after a sharp rebound earlier, while the steadying US dollar is also giving oil bulls a reason to pause.

However, despite the fall in oil prices, market watchers remain hopeful on the fundamentals of the oil market amid the improving COVID-19 situation in many countries and the recent vaccination approval by the US Food and Drug Administration.

"Crude prices should benefit from declining inventories and as the world's largest economies start to see a return of normal crude demand," Moya added.

An ANZ research analyst said there were signs of improving mobility in China "with traffic congestion in several major cities and regional towns in China seeing an increase as compared to a week ago."

Elsewhere, India's July demand for oil products rose 3% from June and was up 7.9% year on year at 16.8 million mt, or 4.3 million b/d, the oil ministry said Aug. 24. The average run for all categories of refineries in India rose to 91% in July from 90% the previous month, reflecting the highest run in three months.

Meanwhile, all eyes will be on the upcoming Jackson Hole Symposium, set to start on Aug. 26, as market watchers will be looking for signs of the US Federal Reserve possibly starting to taper its asset purchase program, which will in turn impact the strength of the dollar and movement of oil prices.

"A weaker US dollar today [Aug. 25] is offering some support to the broader commodities complex, whilst the US Federal Reserve's Robert Kaplan has said that he may rethink his call for tapering if the delta variant weighs on the recovery," analysts from ING noted.

The OPEC+ alliance is set to hold its own meeting on Sept. 1 to review policy, with some market watchers expecting the group to hold off on easing supply in the wake of the recent COVID-19 resurgence.