OIL FUTURES: Crude prices fall as Middle East risk premium ebbs

Crude oil futures decreased in midafternoon Asia trade Oct. 28 as Middle East tensions abated a little after measured Israeli airstrikes against Iran that targeted specific sites and avoided oil infrastructure.

At 2:55 pm Singapore time (0655 GMT), the ICE December Brent futures contract was down $3.10/b (4.08%) from the previous close at $72.95/b while the NYMEX November light sweet crude contract fell $3.08/b (4.29%) at $68.70/b.

"The concern for the market had been if Israel targeted Iran's energy or nuclear infrastructure. The more targeted response from Israel leaves the door open for de-escalation and clearly the price action in oil this morning suggests the market is of the same view," said Warren Patterson, head of commodities strategy, and Ewa Manthey, commodities strategist, at ING.

In addition to easing supply disruption fears, the anticipated outcome of the US presidential race also contributed to the selloff.

"Regarding the upcoming US election, Trump remains ahead in all key battleground states, suggesting a narrow regain of the White House is likely," Tony Sycamore, a market analyst from IG, said.

Household expenditure in the US was seen softening, with uncertainty surrounding the elections cited as a factor behind the bearishness, ANZ Research market analysts said.

The latest statements from the Federal Open Market Committee gave little insight into the pace of monetary easing.

"There was nothing in the comments of voting members that suggested they are considering a pause in [Federal Reserve interest rate cuts for] November," the ANZ Research analysts added.

Analysts are expecting a more dovish rate cut while the existing labor market resilience from lower-than-anticipated jobless claims has kept the crude demand outlook steady.

"The interest rates market begins the week with a 95% chance of a 25 basis point Federal Reserve [interest] rate cut in November and a cumulative 44 bps of cuts expected by year-end," IG's Sycamore said.

The market awaits a slew of key macroeconomic data to provide further clarity. Slated for release later in the week, the advance estimate of the US third-quarter gross domestic product growth, the US core personal consumption expenditure price index for October, the official Chinese manufacturing Purchasing Managers' Index for October, and US non-farm payroll reports for October will be in focus.

The US non-farm payroll reports for October, due for release Nov. 1, will provide further clues about labor market conditions, and by extension, crude demand.

Dubai crude

Dubai crude swaps and intermonth spreads were narrower in midafternoon Asia trading Oct. 28 from the previous close.

The December Dubai swap was pegged at $71.06/b at 2:30 pm Singapore time (0630 GMT), down $1.35/b (1.86%) from the previous Asian market close.

The November-December Dubai swap intermonth spread was pegged at 22 cents/b, down 2 cents/b over the same period, and the December-January intermonth spread was pegged at 43 cents/b, stable from the previous close.

The December Brent-Dubai exchange of futures for swaps was pegged at $1.75/b, down 19 cents/b.