Crude oil futures extend losses as bearish sentiment dominates

Crude oil futures were lower in mid-morning trade in Asia Nov. 18, extending losses following a sharp overnight tumble, as a draw in US oil inventories across the board failed to overcome rising bearish pressures on both the supply and demand side.

At 10:35 am Singapore time (0214 GMT), the ICE January Brent futures contract was down 30 cents/b (0.37%) from the previous close at $79.98/b, while the NYMEX December light sweet crude contract fell 68 cents/b (0.87%) at $77.68/b. Both benchmarks had shed 2.6%-3% in value overnight.

"Oil prices took center stage in pulling the energy sector lower, as expectations of a coordinated release in oil supplies from the US and other countries drove some profit-taking," IG market strategist Yeap Jun Rong said.

Media reports indicated the US has asked multiple countries, including China, Japan and India, to tap on their oil reserves in a bid to counter surging energy prices.

While analysts have noted that such a move would be a short-term fix for rising oil prices, the news nonetheless brings back into focus inflationary pressures faced by major economies around the world.

Most recently, the UK reported Nov. 17 inflation rising by 4.2% on the year last month, a 10-year high. This comes on the back of the US reporting last week inflation reaching highs not seen in three decades.

COVID-19 cases also continue to be a point of concern, with several countries in Asia not seeing a let-up in caseload figures despite high vaccination numbers and some tightening lockdown restrictions further.

"Despite improving vaccination across the region, COVID-19 risks continue to be closely monitored," Yeap said.

"Singapore's daily new cases have jumped back to the 3,500 level yesterday [Nov. 17], likewise for South Korea with a new record in daily virus cases, while Beijing sees some tightening of restrictions despite fewer daily infections. That may put a cap on upside for now as markets look towards the next catalyst to lift sentiments," he added.

The bearish headlines overshadowed any upside from US Energy Information Administration data showing inventory draws across the board last week.

Total US commercial crude oil inventories declined 2.1 million barrels in the week ended Nov. 12 to 433 million barrels, the EIA said Nov. 17. Total US gasoline stocks slipped 710,000 barrels to 212 million barrels, while distillate stocks fell 820,000 barrels to 123.69 million barrels.

"The release of the weekly EIA report showing a large fall in inventories did little to stop the selling. This may be due to the bearish tone that both the IEA and OPEC set earlier this week in their monthly oil market reports. Both expect the market to move into surplus in the not too distant future," said ANZ Research analysts Brian Martin & Daniel Hynes in a note.