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Crude oil futures dip on profit-taking, remain on track for strong weekly finish


US pump prices fall below $4/gal for first time since early March

'Substantial' gas-to-oil switching in Europe amid gas crunch: IEA

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  • Andrew Toh
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  • Wendy Wells
  • Commodity
  • Natural Gas Oil Petrochemicals

Crude oil futures were lower in mid-morning Asian trade Aug. 12 amid mild profit-taking, though they remained on track for a strong weekly finish as fears of demand destruction eased with oil prices down more than 20% from their June highs.

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At 10:26 am Singapore time (0226 GMT), the ICE October Brent futures contract was down 64 cents/b (0.64%) from the previous close at $98.96/b, while the NYMEX September light sweet crude contract was 64 cents/b (0.68%) lower at $93.70/b.

The malaise in oil markets in recent weeks appeared to be turning a corner, with analysts saying that demand was on the mend and confidence in the US economy recovering after a more than 20% slide in oil prices from their post-pandemic highs.

Both crude oil benchmarks were on track for gains of around 5% on the week.

The positive sentiment has been aided in large part by US data this week showing a rebound in US gasoline demand, while signs that inflation has reached its peak eased concerns of further aggressive maneuvering by the US Federal Reserve.

"Signs of strong demand boosted sentiment across commodity markets. This was aided by the slight cooling of inflation, which eased concerns of more aggressive rate hikes and weaker economic activity," said ANZ Research analysts Brian Martin and Daniel Hynes in an Aug. 12 note.

US gasoline pump prices fell below $4/gal for the first time since early March on Aug. 11, the American Automobile Association said, down from an all-time high of $5.016/gal recorded on June 14 for regular unleaded gasoline.

US gasoline benchmark NYMEX RBOB meanwhile settled at a 5-month low of $2.79/gal on Aug. 4 for the front-month contract, though it has since risen to trade at around $3.056/gal as of 0226 GMT Aug. 12.

"Nationwide gas prices are now below $4/gallon and that should definitely provide some relief for what has been a lackluster summer driving season," said OANDA senior market analyst Edward Moya.

The International Energy Agency in its monthly oil market report Aug. 11 raised its 2022 oil demand growth estimate by 380,000 b/d to 2.1 million b/d, citing "soaring" oil use in power generation and gas-to-oil switching in industry prompted by the Ukraine crisis and surging gas prices.

"A looming natural gas crunch in Europe is already incentivizing substantial gas-to-oil demand substitution," it said, suggesting the situation could persist until at least the end of 2023.

Analysts expect oil prices to hold above the $90/b level going forward as demand continues to recover.

Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia Aug. 12 from the previous close.

The October Dubai swap was pegged at $92.48/b at 10 am Singapore time (0200 GMT), up $1.28/b (1.4%) from the previous Asian market close.

The September-October Dubai swap intermonth spread was pegged at $2.28/b at 10 am, up 2 cents/b over the same period, and the October-November intermonth spread was pegged at $1.34/b, up 5 cents/b.

The October Brent/Dubai EFS was pegged at $6.53/b, up 42 cents/b.