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Crude oil futures rangebound amid lack of fresh cues


Oil prices supported by Druzbha pipeline disruption

Upside capped by uncertain demand outlook

  • Author
  • Andrew Toh
  • Editor
  • Wendy Wells
  • Commodity
  • Oil

Crude oil futures were mostly steady in mid-morning Asian trade Aug. 10 as prices continued to drift sideways amid an uncertain demand outlook, though some support was seen from a suspension of Russian oil flows to Central and Eastern Europe.

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At 10:14 am Singapore time (0214 GMT), the ICE October Brent futures contract was up 9 cents/b (0.09%) from the previous close at $96.40/b, while the NYMEX September light sweet crude contract was 5 cents/b (0.06%) lower at $90.45/b.

Oil prices continued to see directionless trade as investors weighed fragile macroeconomic fundamentals worldwide against a still robust US labor market and supply disruptions from Russia.

Prices had surged in the intra-day Aug. 9 session after Russian pipeline operator Transneft suspended oil flows through the Druzbha pipeline due to a payment issue. The pipeline sends Russian crude to Eastern and Central European states including Hungary, Czechia and Slovakia.

"These countries are highly reliant on this pipeline and have been exempt from Europe's recent sanctions on Russia oil imports," said ANZ Research analysts Brian Martin and Daniel Hynes in a Aug. 10 note. "The options for additional oil are limited."

Nonetheless, the outlook for oil remained highly uncertain. While sentiment has been shaky in recent weeks due to persistent recession fears, signs of optimism were seen in the US labor market, which remains tight.

Analysts also say the recent oil price selloff was overdone as the oil market remains in deficit.

US investment bank Goldman Sachs, while cutting its oil price forecast to $110/b for this quarter in an Aug. 7 note due to a "mounting wall of worries," said the skew for oil prices remained to the upside due to "record low spare capacity," media reports indicated.

The US Energy Information Administration meanwhile on Aug. 9 lowered its forecast for US oil production in 2022 by 50,000 b/d to 11.86 million b/d, while the 2023 supply forecast was lowered by 70,000 b/d to 12.7 million b/d.

"Whatever crude demand destruction that occurs from a weakening global economy won't be able to drag down oil prices much lower given how low the supply outlook remains," said OANDA senior market analyst Edward Moya in a late Aug. 9 note.

Crude oil time spreads continued to hover at multi-month lows in a sign of easing tightness at the prompt.

The M1-M2 ICE Brent time spread was trading at $1.43/b at 10:14 am Singapore time Aug. 10, down 3 cents/b from the Aug. 9 settlement and a low not seen since May 11.

Dubai crude swaps were higher in mid-morning trade in Asia Aug. 10 from the previous close, though intermonth spreads were lower.

The October Dubai swap was pegged at $89.69/b at 10 am Singapore time (0200 GMT), up $1.36/b (1.54%) from the Aug. 8 Asian market close.

The September-October Dubai swap intermonth spread was pegged at $2.46/b, down 2 cents/b over the same period, and the October-November intermonth spread was pegged at $1.40/b, down 17 cents/b.

The October Brent/Dubai EFS was pegged at $6.65/b, down 15 cents/b.