Crude oil futures pare gains on profit-taking after 2-day rally

Crude oil futures were marginally lower during mid-morning trade in Asia Dec. 8, as investors booked profits after a stellar 2-day rally that erased some of the heavy losses sustained over late November.

At 10:42 am Singapore time (0221 GMT), the ICE February Brent futures contract was down 5 cents/b (0.07%) from the previous close at $75.39/b, while the NYMEX January light sweet crude contract fell 5 cents/b (0.07%) at $72/b.

Crude prices have added close to 10% in value over the last two days alone as emerging reports continued to cement the view that the omicron variant of the coronavirus, though more transmissible, was less deadly than earlier strains.

Analysts said oil prices were ripe for some profit-taking, though the upward momentum remained intact in the longer term. Crude prices were currently hovering not far from overbought territory, the Relative Strength Index on the four-hourly charts for both benchmarks showed, though the daily chart showed they still had room to run.

Also weighing on prices were reports of a build in US gasoline and distillate inventories last week, the American Petroleum Institute said according to media reports.

"The API data, on balance, is somewhat bearish. That appears to be weighing on market sentiment this morning. But the downward momentum is mild and the omicron relief rally may prevail," Vandana Hari, CEO of Vanda Insights, said.

"The EIA data later today may end up being a blip on the market radar, likely to be overshadowed by the COVID situation not just this week, but for days to come," Hari said, referring to the US Energy Information Administration which is set to release its own inventory report later Dec. 8.

The API said Dec. 7 that US gasoline inventories rose by 3.7 million barrels for the week ended Dec. 3, while distillate stocks edged higher by 1.2 million barrels over the same period.

That overshadowed a draw in US crude oil inventories of 3.1 million barrels.

"The refined product builds more than offset the total crude drawdown. Therefore, the report was neutral to slightly bearish," according to ING analysts Warren Patterson and Wenyu Yao.

"The risk is still for oil prices to go higher and if colder weather returns, we could easily see $80/b oil in a couple of weeks," OANDA's senior market analyst Edward Moya said.