Crude oil futures inch higher despite US crude build

Singapore — 0323 GMT: Crude oil futures ticked up during mid-morning trade in Asia Oct. 8, clawing back some of the overnight losses, as the impact of a build in US crude inventories was negated by the support offered to the market by draws in product inventories and escalating supply disruptions in Norway and the US Gulf of Mexico.

At 11.23 am Singapore time (0323 GMT), ICE Brent December crude futures were up 13 cents/b (0.31%) from the Oct. 7 settle to $42.12/b, while the NYMEX November light sweet crude contract was up 5 cents/b (0.13%) at $40/b. Both international crude markets had dived 1.55% and 1.77% to settle at $41.99/b and $39.95/b respectively on Oct. 7, when the cancellation of US stimulus negotiations had rattled the market.

The uptick came despite data from the US Energy Information Administration showing that, due to increased US production and a slowdown in exports, US commercial crude inventories jumped 500,000 barrels to 492.93 million barrels in the week ended Oct. 2.

The impact of the crude inventory build was cushioned by indications of improved downstream demand, as the EIA data also showed that, in the same week, US distillate inventories fell 960,000 barrels to 171.8 million barrels and US gasoline inventories fell 1.44 million barrels to 226.75 million barrels, 0.4% lower than the five-year average gasoline inventory.

Stephen Innes, chief market strategist at AXI, in an Oct. 8 note said: " Prices received some support from a draw in product stocks in the DOE data, which offset small crude build."

In addition, escalating supply disruptions in Norway and the US Gulf has also buoyed oil prices.

With 330,000 b/d of oil equivalent production already offline in Norway, the Lederne union in Norway said that it will extend its strike on Oct. 11 to include two platforms at the flagship Ekofisk field, two satellite fields that feed the Oseberg crude stream, and Kristin, a satellite of the Asgard crude stream, S&P Global Platts reported on Oct. 7.

"Around 330,000 barrels a day have already been lost to the strike, and [the Lederne union's latest move] is expected to add about 170,000 more," Innes said.

Meanwhile, in the US Gulf of Mexico, nearly 1.49 million b/d of crude production and 1,335 MMcf/d of natural gas production -- 80.42% and 49.26% of total offshore output, respectively, -- was offline, according to the US Bureau of Safety and Environmental Enforcement, as producers in the region braced for the Hurricane Delta..

Lastly, hopes of fiscal relief continued to lift market sentiment. US President Donald Trump, after shutting down discussions over a US stimulus package till after the elections, said he supported passing stand-alone relief provisions instead.

ANZ analysts in an Oct. 8 note said: "House leader Nancy Pelosi signaled openness to such a bill, resulting in a risk on tone enveloping markets."