Crude oil futures remain lower on weak demand outlook, bearish sentiment

Singapore — 0246 GMT: Crude oil futures were lower in mid-morning trade in Asia Sept. 9 as the global crude complex continued to grapple with a weak demand outlook at the end of the US driving season and a rise in COVID-19 infections worldwide.

At 10:46 am Singapore time (0246 GMT), ICE Brent November crude futures were down 20 cents/b (0.50%) from the Sept. 8 settle at $39.58/b, while the NYMEX October light sweet crude contract was 24 cents/b (0.65%) lower at $36.52/b.

"Downward pressure on oil has continued, with ICE Brent futures closing more than 5% lower yesterday, and crucially below the $40/b level. There was no clear catalyst for the move, however a stronger US dollar and weaker equities would have done little to help sentiment, not just for oil, but the broader commodities complex," ING analysts said in a note Sept. 9.

The global crude complex has retreated in recent days as a multitude of negative factors weighed heavily on market sentiment. These include the end of the US driving season and the start of the extended maintenance season for US refineries, which will see a tapering of demand for gasoline and crude, as well as slower buying by China in August as its stocks approach maximum storage capacity.

Combined with a stronger dollar and weaker risk sentiment, which further dented demand across the commodities complex, ICE Brent futures have fallen 13.7% in two weeks since settling at $45.86/b Aug. 25, a two-week high, while WTI has fallen 15.8% since settling at $43.39/b on Aug. 26, S&P Global Platts data showed.

As a result, front-month inter-month timespreads for ICE Brent futures have turned significantly more bearish, with the November/December timespread assessed at minus 55 cents/b Sept. 8, Platts data showed.

"Timespreads continue to edge deeper into contango, while the physical market is weaker; over the last few days we have had both Aramco from Saudi Arabia and Abu Dhabi National Oil Company, or ADNOC, from the UAE cutting official selling prices for their crude oil. Both of their flagship grades are now at discounts to their benchmark, which is not a great signal for demand," ING analysts said in a note Sept. 9.

ADNOC set the October OSP for its flagship Murban crude at Platts Dubai minus 50 cents/b, down $1.35/b from September, and medium sour Upper Zakum grade at a discount of 70 cents/b against Platts Dubai, down $1.35/b, Platts earlier reported.

Meanwhile, global COVID-19 infections continue to rise to more than 200,000 infections/day, while global deaths approach the 900,000 mark, latest John Hopkins University data showed.

Market participants were awaiting the release of weekly US inventory reports by the American Petroleum Institute later Sept. 9 and the Energy Information Administration on Sept. 10 for fresh cues on price direction.

At 10:46 am Singapore time (0246 GMT), the US dollar index stood at 93.510, up 0.07% from the previous close at 93.441, while the NYMEX October RBOB stood at $1.0985, down 0.39% from its previous settle at $1.1028/gal.