Crude oil futures inch higher as talk of US action pressures sentiment

Crude oil futures inched higher in mid-morning trade in Asia Nov. 9 amid thin activity, though sentiment was pressured by reports that the US was considering taking action to curb rising oil prices.

At 10:11 am Singapore time (0211 GMT), the ICE January Brent futures contract was up 11 cents/b (0.13%) from the previous close at $83.54/b, while the NYMEX December light sweet crude contract was similarly up 11 cents/b (0.13%) at $82.04/b.

US Energy Secretary Jennifer Granholm said Nov. 8 that US President Joe Biden might take action this week to address soaring oil and gasoline prices. The US President has been vocal in recent weeks in calling on OPEC to raise output beyond their planned quotas and has blamed the group for the current high oil prices.

Analysts said the most likely option for the Biden administration was to tap its Strategic Petroleum Reserves. A ban on crude oil exports, an option that had been brought up by Granholm in the past, was less likely.

"The most obvious tool for the US administration to use is the Strategic Petroleum Reserve," said ING analysts Warren Patterson and Wenyu Yao in a note.

"Outside of mandated and SPR modernization sales (and a test sale in 2014), the last sale was part of a coordinated IEA release back in June 2011, which saw 30.6 million barrels released. There have also previously been suggestions that the US could implement a ban on crude oil exports. While we believe this is less likely, if such action was taken, it would lead to a widening in the WTI/Brent discount," Patterson and Yao said.

Nonetheless, there are signs that the OPEC+ group continues to face difficulty in ramping up output to required levels.

The latest S&P Global Platts survey showed OPEC and its allies boosted crude oil production by 480,000 b/d in October. Only half of the group's members actually increased output last month as many in the coalition are struggling to pump as many barrels as they had promised.

Output from Africa's largest crude producer Nigeria dropped to 1.37 million b/d last month, according to the survey, which is 261,000 b/d below its OPEC+ quota. The country continues to be hamstrung by operational setbacks, with key pipelines facing persistent sabotage. Production from Angola meanwhile slipped 40,000 b/d to 1.11 million b/d, well below its quota of 1.362 million b/d.

Investors will now be looking to weekly inventory reports from the US for the next gauge in sentiment. Analysts surveyed by S&P Global Platts said Nov. 8 they expect US commercial crude stocks to have climbed 1 million barrels to 435.1 million barrels last week.

Total gasoline stockpiles are expected to have declined by 1.6 million barrels to 212.7 million barrels, while distillate stocks are expected to be unchanged on the week at around 127.1 million barrels.

Analysts at OCBC Treasury Research said they expect oil to trade sideways for the time being.

"We expect oil to remain rangebound from $80-$85 in the near term," the analysts said.