Crude oil futures rise as positive API data underscores bullish sentiment

Singapore — 0303 GMT: Crude oil prices continued on their upward trajectory during mid-morning trade in Asia Nov. 11, as positive data from the American Petroleum Institute further buoyed markets still riding high from indications of OPEC+ intervention and reports of progress in the development of a COVID-19 vaccine.

At 11.03 am Singapore time (0303 GMT), ICE Brent January crude futures were up 38 cents/b (0.87%) from the Nov. 10 settle to $43.99/b, while the NYMEX December light sweet crude contract was up 41 cents/b (0.99%) at $41.77/b.

Oil prices had continued their impressive rally on Nov. 10, with both the Brent and WTI markers settling 2.85% and 3.30% higher on the day at $43.61/b and $41.62/b, respectively. The surge in oil futures this week is attributable to the easing of political uncertainty following a Biden win in the US election, preliminary reports of an efficacious Pfizer and BioNTech vaccine and optimism that the OPEC+ alliance will keep supply in the market constrained.

With the above factors continuing to spur bullishness in the market, oil prices received another boost this morning after the API reported on Nov. 10 that US crude inventories had declined by 5.147 million barrels in the week ended Nov. 6. This week's data, coupled with last week's data, which had shown a dramatic 8.01 million-barrel fall in crude inventories in the week ended Oct. 30, indicated improved fundamentals in the market.

The API data also evinced improved fundamentals in the downstream oil markets, showing a 3.297 million-barrel and 5.619 million-barrel draw in gasoline and distillate inventories, respectively.

At 11.03 am Singapore time, the NYMEX December RBOB contract was trading 0.69 cents/gal (0.58%) higher than the Nov. 10 settle at $1.2010/gal and December ULSD contract was up by 0.75 cents/gal (0.60%) at $1.2600/gal.

Market analysts, however, remained cautious, noting that the near-term outlook for oil is still clouded by European lockdowns and record high COVID-19 infections in the US, which could force the country to follow Europe in enacting more restrictions.

David Lennox, resource analyst at Fat Prophets, told S&P Global Platts Nov. 11: "Yes, there has been some good news on the vaccine front, but the vaccine is still only experimental. The API drawdown was also positive, but the outlook is still not great. Markets tend to run ahead of themselves."

"I suspect we will see some sort of correction in the prices soon, once traders realize that fundamentals are not as rosy as they seem," Lennox concluded.