OIL FUTURES: Crude strengthens on uncertainty over Middle East tensions

Crude oil futures strengthened in mid-afternoon Asian trade Oct. 9, following uncertainty about the geopolitical climate amid tensions in the Middle East.

At 2:50 pm Singapore time (0650 GMT), the ICE December Brent futures contract was up 30 cents/b (0.39%) from the previous close at $77.48/b, while the NYMEX November light sweet crude contract rose 18 cents/b (0.24%) to $73.75 /b.

IG market analysts said that crude prices had risen following key developments between Iran and Israel. "Recently, the price of [US] crude oil fluctuated above its 200-day moving average of $78.46 before retreating," said Tony Sycamore, market analyst at IG.

Brent climbed in tandem, breaking through psychological levels of $80.00/b owing to increasing concerns that Iranian oil infrastructure could be compromised.

"The Organisation of the Petroleum Exporting Countries claims to have enough spare capacity should Iran's oil facilities be knocked out. However, the global oil supply could become imbalanced if Iran retaliates in a tit-for-tat strike in the Gulf," IG market analysts added.

Still, price gains could be capped as investors are caught between the "pendulum" of "ceasefire talks" and "a further escalation in attacks," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

"The potential for a ceasefire eased some concerns about wider Middle East conflict leading to disruptions in the oil-rich region and stripped away some surge in oil prices," Sachdeva added.

The latest data from the American Petroleum Institute showed that US crude inventories surged 11 million barrels on the week, further limiting gains.

"[It is] a sign of ailing demand from the world's largest economy. Investors are likely seeking further clarity on demand from the upcoming official data and US CPI numbers on Oct. 11," Sachdeva continued.

The market remains focused on the upcoming US CPI update for September, with market analysts saying a sufficiently soft rise in CPI data could prevent the US dollar from rising to very high levels and dampening demand for crude.

"The US dollar index consolidates near a major Fibonacci level, the 38.2% retracement on summer retreat, near the 102.50 level. Parallelly, the Eur-USD consolidates near its own major Fibonacci retracement level, 1.0980. A move above or below these levels, respectively, will send the US dollar into a medium-term bullish consolidation zone, and the euro into the medium-term bearish consolidation zone," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

The ICE US Dollar Index was at 102.307 as of 0655 GMT Oct. 9, up 0.07% from the previous close. A stronger dollar makes dollar-denominated assets like oil futures more expensive to investors holding foreign currencies, dampening demand for these assets.

Dubai crude

Dubai crude swaps and inter-month spreads were lower from the previous close in mid-afternoon Asian trading Oct. 9.

The December Dubai swap was pegged at $75.57/b at 2:50 pm Singapore time (0650 GMT), down $1.58/b (2.05%) from the previous Asian close.

The November-December Dubai swap intermonth spread was pegged at 53 cents/b, narrower by 5 cents/b over the same period, and the December-January intermonth spread was pegged at 33 cents/b, narrower by 9 cents/b.

The December Brent-Dubai exchange of futures for swaps was pegged at $1.91 /b, down 25 cents/b.