Crude futures rise on ECB stimulus expectations, robust US economic data

Singapore — 0314 GMT: Crude oil futures rose during mid-morning trade in Asia Oct. 30, as traders took advantage of weak crude prices to pick up some bargains following an overnight plunge, with indications of a new round of monetary stimulus from the European Central Bank and better-than-expected US economic data also providing relief to markets.

At 11.14 am Singapore time (0259 GMT), ICE Brent December crude futures were up 25 cents/b (0.66%) from the Oct. 29 settle to $37.90/b, while the NYMEX December light sweet crude contract was up 25 cents/b (0.69%) at $36.42/b.

ICE Brent and NYMEX crude futures had dived 3.76% and 3.26% to settle at $37.65/b and $36.17/b, respectively on Oct. 29, as the market digested the demand-side implications of nation-wide lockdowns in Germany and France, Europe's largest and second largest economy, respectively.

Reflecting on uptrend in prices, Vandana Hari, chief executive officer at Vanda Insights told Platts Oct. 30: "Like yesterday, traders in Asia are taking advantage of the low prices to carry out some bargain hunting."

Meanwhile, ANZ analysts attributed the rise in prices to robust US economic data and the possibility of an ECB stimulus in December, saying in an Oct. 30 note: "The release of GDP for US showing a record strong rebound in Q3 saw crude oil reverse some of [their losses]. Sentiment was also supported by the ECB signalling a new package of monetary stimulus in December."

The ECB had said in an Oct. 29 statement that when it meets again in December, it will "carefully assess the incoming information" relating to the pandemic and "recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path."

Furthermore, US Commerce department data had shown that GDP had surged 33.1%, or $1.64 trillion, to $21.16 trillion in the third-quarter, while the US Labor Department data showed that the country's weekly unemployment claims had fallen 40,000 to 751,000 in the week ended Oct. 24.

Hari, however, stressed that economic data are backward looking and therefore will not offer significant comfort to markets, especially when they are staring down the barrel of subdued demand due to a resurgence in coronavirus cases in the US and amid European lockdowns.

"With demand-side fundamentals still looking bleak, the only thing that could put a floor on prices right now is a supply-side response...the market wants to hear from OPEC+ leaders Saudi Arabia and Russia that the alliance will reconsider the scheduled roll-back in production quotas," Hari said. "Time is running out for the OPEC+ to make a decision."

Meanwhile, analysts said that the market also gained some support from the larger-than-expected shut-ins caused by Hurricane Zeta in the US Gulf Coast. According to data by the US Bureau of Safety and Environmental Enforcement, as of Oct. 29, 1.57 million b/d of crude output, or 84.8% of the US Gulf's crude capacity, had been shuttered and 35% of the region's platforms and rigs, or 231 facilities, had been evacuated.

However, this support may be transient, as the latest advisory from the National Hurricane Center issued late Oct. 29 showed that Zeta, which has now degraded into a Post-Tropical Cyclone, should dissipate on Oct. 30, paving the way for the region's production to resume.