Crude futures extend losses in Asia trade on bearish demand outlook

Singapore — 0257 GMT: Crude oil futures were lower in mid-morning trade in Asia Sept. 7 amid reignited concerns of a weak near-term global demand outlook as the US driving season comes to an end.

At 10:57 am Singapore time (0257 GMT), ICE Brent November crude futures were down 42 cents/b (0.98%) from the Sept. 4 settle at $42.24/b, while the NYMEX October light sweet crude contract was 45 cents/b (1.13%) lower at $39.32/b.

"Crude oil extended losses ... as investors become increasingly concerned about weaker demand," ANZ analysts said in a note Sept. 7.

"With the Labor Day in the US officially marking the end of the summer driving season, investors are also facing up to the fact that demand has been lackluster, while inventories remain at elevated levels. Crack spreads remain weak, which is prompting US refiners to schedule extended maintenance periods amid high inventories," the ANZ analysts added.

US Energy Information Administration data released Sept. 2 showing total refined products supplied - a proxy for demand - fell more than 13% to 16.98 million b/d in the week ending Aug. 28 sparked a selloff in the global crude complex late last week. It was the largest weekly decline in demand since the week ended Apr. 3 and pushed total weekly products supplied to a three-month low.

A 4.1% drop in total motor gasoline supplied to 8.79 million b/d in the US data also contributed to bearish sentiment about a weakening demand outlook.

The selloff was further exacerbated by weakness and de-risking across major equity markets amid a strengthening dollar, which had been providing significant support to the oil market in previous weeks.

"So, while peering into the September viewfinders, traders not only find themselves at the end of the runway on bullish catalysts, but have now overshot the runway and fallen into a possible brink of despair as the key fundamental and psychological WTI $40/b gave way, triggering stops in cascading fashion," Stephen Innes, chief global markets strategist at AxiCorp, said in a note Sept. 7.

Other analysts expect the Brent marker could also move lower in coming weeks after trading in a tight range of $43-$45/b over the past two months, with the next key support level at $40/b.

"Traders might need some monetary or fiscal policy encouragement to jump back on the saddle again in any meaningful way after a massive 9% weekly selloff," Innes added.

At 10:57 am Singapore time (0255 GMT), the US dollar index stood at 92.873, up 0.17% from its previous close at 92.719 while the NYMEX October RBOB stood at $1.1650, down 1.04% from the previous settle of $1.1772/gal.