Crude oil futures lower in Asia trade after surprise build in US inventories

Singapore — 0217 GMT: Crude oil futures were lower in mid-morning trade in Asia Sept. 10 after American Petroleum Institute data released late Sept. 9 pointed to an unexpected rise in US commercial crude inventories.

At 10:17 am Singapore time (0217 GMT), ICE Brent November crude futures were down 22 cents/b (0.54%) from the Sept. 9 settle at $40.57/b, while the NYMEX October light sweet crude contract was 28 cents/b (0.74%) lower at $37.77/b.

"ICE Brent futures managed to creep back above the $40/b level yesterday, with equities rebounding and the dollar resuming its weakening trend. However, fundamentally, not much has changed in the oil market," ING analysts said in a note Sept. 10.

"There continues to be concern over the state of the physical market, with values weakening and increasing difficulty in shifting West African cargoes - likely due to a lack of Chinese buying recently," the analysts added.

After six consecutive days of losses in the global crude complex, crude oil futures rose overnight amid a broader rally across global markets. The rebound in US equity markets after a three-day rout helped spur buying across other risk assets, with the broader commodities complex the main beneficiary.

However, sentiment remained fragile on the back of a weak demand outlook across major economies, with investors cautiously watching for further signs of weaknesses in global demand recovery.

American Petroleum Institute data released late Sept. 9 showed an unexpected build in US crude stocks for the week ending Sept. 4.

"The API reported late Wednesday that US crude oil inventories increased by 2.97 million barrels over the last week and is the likely reason oil is trading lower in Asia this morning," ING analysts said.

Market participants will look to the more definitive weekly US inventory report due for release by the Energy Information Administration later in the day for confirmation. It would be the first build in US commercial crude inventories after six consecutive weeks of drawdown if the official EIA data confirms the API industry report.

"We believe headwinds are building for the oil market on the prospect of subdued demand and rising supply. Maintenance season and a cautious approach from refiners should keep crude oil demand soft, while OPEC+ output is expected to increase by up to 2 million b/d in the second half of 2020. So we see prices struggling to move higher from the current level," ANZ analysts said in a note Sept. 10.

At 10:17 am Singapore time (0217 GMT), the US dollar index stood at 93.220, down 0.04% from its previous close at 93.255, while the NYMEX October RBOB stood at $1.1185, down 0.07% from the previous settle at $1.1193/gal.