Crude oil futures slip on profit-taking as rally cools

Crude oil futures were lower in mid-morning Asian trade Feb. 8, easing off multi-year highs as a seven-week long bull-run appeared to lose steam, though market watchers were in consensus that the rally still had legs to run.

At 10:40 am Singapore time (0240 GMT), the ICE April Brent futures contract was down 12 cents/b (0.13%) from the previous close at $92.57/b, while the NYMEX March light sweet crude contract fell 5 cent/b (0.05%) at $91.27/b.

The front month ICE Brent crude contract had traded as high as $94/b during intraday trading Feb. 7, a level last seen on Oct. 3, 2014, though profit-taking saw it shed gains to settle 0.6% lower.

Analysts said the outlook for crude prices remained pointed to the upside, with supply still running short of demand globally.

"The rally in crude was ready for a break as risk aversion sent equities lower," OANDA's senior market analyst Edward Moya said in a Feb. 8 note. "The oil market still remains heavily in deficit and whatever weakness happens to prices will likely be short-lived."

A cold snap in the US and significantly lower inventory levels were leading to extreme bullishness in both eastern and western gasoil markets.

Trading in the US ULSD spot market were reported as high as flat to March futures on Feb. 7, marking the differential's highest level since Sept. 8, 2017, when it reached plus 3.50 cents/gal.

Market sources said the cold snap on the US Gulf Coast was partly responsible for outages at Marathon's Galveston Bay refinery and Valero's Texas City and Houston facilities throughout the weekend and into the second week of February.

The Singapore 10 ppm sulfur gasoil time spread surged to highs not seen in nearly 14 years. The M1-M2 spread was up 62 cents/b since the start of February to hit $2.55/b at the Asian close Feb. 7, a level last seen on April 21, 2008.

"Gasoil stocks in the ARA region in Europe stand at 1.58 million mt, which is the lowest level seen since 2014," ING analysts Warren Patterson and Wenyu Yao said in a Feb. 8 note, citing data from Insights Global.

"It is a similar story in other regions. Singapore middle distillate stocks have recently fallen to the lowest levels since 2013, whilst in the US, distillate stocks are at least at a 5-year low for this stage of the year."

In a Feb. 8 note, OCBC Treasury Research analysts said: "[Feb. 7's] loss was probably due largely to profit-taking. We still expect oil to test $100/b in the near term."