Crude edges lower in Asia trade as OPEC+ comment dashes output cut hopes

Singapore — 0305 GMT: Crude oil futures edged lower in mid-morning trade in Asia Oct. 14 as comments dashing hopes of an extension to the current OPEC+ production cut countered strong China import data that had fueled sharp overnight gains.

At 11.05 am Singapore time (0305 GMT) ICE Brent December crude futures were down 17 cents/b (0.4%) from the Oct. 13 settle at $42.28/b, while the NYMEX November light sweet crude contract was also down 17 cents/b (0.42%) at $40.03/b. The benchmarks had settled 1.75% and 1.95% higher, respectively, Oct. 13.

However, sentiment subsequently soured when UAE energy minister Suhail al-Mazrouei quashed speculation that OPEC+ was reconsidering its scheduled 2 million b/d rollback in production. "That is the agreement we signed. It is very clear," Mazrouei said late Oct. 13 at the Energy Intelligence Forum.

OPEC+ is scheduled to relax its current 7.7 million b/d output cut to 5.8 million b/d from January 2021, but a bleak demand outlook amid the resurgent coronavirus pandemic and the return of barrels from Libya had been fueling optimism the rollback may be postponed.

Markets had earlier Oct. 13 been boosted by the release of strong data by China Customs that showed the country's crude imports rose 17.6% year on year to 48.5 million mt in September, and were up 2.1% on month. Imports over January-September were up 12.7% on year at 416 million mt, the data showed.

OPEC in its monthly oil market report released Oct. 13 had also raised its global oil demand forecast for 2020 by 60,000 b/d to 90.29 million b/d. However, it downgraded its forecast for 2021, expecting oil demand to total 96.84 million b/d, 80,000 b/d lower than its last forecast in September.

"China so far appears to be the only country globally moving steadily on the path to recovery based on gradually improving economic indicators, particularly in industrial production, which is rising from month to month," OPEC said in the report. "Oil demand is projected to be in line with these positive developments and trends."

Aside from China, the demand outlook for oil remains bleak as the threat of renewed restrictions amid a resurgent coronavirus pandemic continue to hang over global economies.

"The recovery remains all too fragile, as reflected through gnarly news flow, a resurgence of is now apparent in many major economies," AXI chief market strategist Stephen Innes said in a note Oct. 14. "The question is how to control the spread, and [whether] broader restrictions [will] feed through economic and mobility activity – and hence oil demand."