Crude futures steady amid fading support from economic data, Russian talks

Singapore — 0307 GMT: Crude oil futures were largely steady during mid-morning Asian trade Nov. 3, as support from strong economic data and speculation over Russian willingness to extend OPEC+ production cuts faded amid bearish fundamentals.

At 11.07 am Singapore time (0307 GMT), ICE Brent January crude futures were 2 cents/b (0.05%) higher from the Nov. 2 settle to $38.99/b, while the NYMEX December light sweet crude contract was 9 cents/b (0.24%) higher at $36.90/b.

January ICE Brent and December NYMEX crude futures had jumped 2.71% and 3.13% on Nov. 2 to settle at $38.97/b and $36.81/b, respectively, as strong economic data from China, Germany and the US stoked bullish sentiment.

Reflecting on the market this morning, Jeffrey Halley, senior market analyst at OANDA, told S&P Global Platts: "Oil was lifted by very strong Purchasing Managers Indices from China, Germany and the US, but frankly I believe today will be a day when investors reduce risk."

"Oil continues to be a sell on any rally as there are COVID-19 shutdowns all across Europe, cases are exploding in the US and there is a lot of uncertainty for all asset classes going into the US elections -- yesterday's rally was entirely speculative," added Halley.

However, the market did glean some optimism from reports that Russian Energy Minister Alexander Novak had met with domestic oil producers to discuss a possible extension of the current OPEC+ production cuts, which are scheduled to ease from 2021 onwards, but no official word over any changes was reported.

OPEC+ delegates had told S&P Global Platts earlier that any changes to the current agreement would require delicate political negotiations, and even some concessions to countries that have grown weary of reining in their production.

Halley surmised: "The discussions yesterday were just with companies and not among governments and may not translate into any action...they are not enough to put a structural floor under oil prices."

Stephen Innes, chief market strategist at AXI, echoed the above sentiment, as he said in a Nov. 3 note that, "The real key to unshackle oil prices from scrapping the bottom of the barrel is having both Russia and Saudi Arabia singing from the same song page in a sign of unified support to defend oil prices."

Meanwhile, analysts surveyed by Platts said that US commercial crude stocks had likely declined by approximately 600,000 barrels in the week ended Oct. 30. The draw in crude inventories, however, is not necessarily indicative of improved fundamentals, but instead could be attributed to Hurricane Zeta, which had shuttered almost 85% of US Gulf crude capacity at its peak.

Following the dissipation of Hurricane Zeta, producers have been quick to redeploy evacuated personnel and resume operations, and according to the late Nov. 2 data by the US Bureau of Safety and Environmental Enforcement, only 28%, or 518,441 b/d of crude production remained offline.