Crude futures extend rise into Asia trade on positive US economic data

Singapore — 0215 GMT: Crude oil futures were trading higher in mid-morning trade in Asia June 26 after positive US economic data buoyed market sentiment about an improved demand outlook, despite fresh outbreaks of COVID-19.

At 10:15 am Singapore time (0215 GMT), ICE Brent August crude futures were up 51 cents/b (1.24%) from the June 25 settle at $41.56/b, while the NYMEX August light sweet crude contract was 45 cents/b (1.16%) higher at $39.17/b.

A US Census Bureau report published June 25 showed that US durable goods orders jumped 15.8% in May, exceeding market expectations. Durable goods orders had contracted by more than 18% in April.

Meanwhile first time US unemployment filings fell to 1.48 million in the week ended June 20, the US Labor Department said, down from 1.51 million the week before. While US initial claims were higher than expected, it was the 12th consecutive week of decline in new claims.

However, a surging number of new coronavirus cases in the US continues to weigh on market sentiment. Data from the COVID Tracking Project showed there were 38,672 positive COVID-19 tests in the US on June 24, a new record high. White House economic adviser Larry Kudlow was quoted in media reports as saying: "There will be shutdowns in individual places or certain stores."

"With fresh outbreaks of COVID-19 in Texas, Florida and California, there is a real threat of this demand recovery stalling. Some states are quarantining travelers from these states and some have halted the reopening of businesses," ANZ analysts said in a note June 26.

On the supply front, resurgent demand and higher price levels could prompt US producers to bring capacity back online, increasing headwinds for crude futures in the near term.

An energy survey by the Dallas Fed published June 24 showed that while 71% of exploration and production firms had some oil production shut in or curtailed over June 10-18, more than a third expected to restart the majority of their production in June and another 20% in July.

"One oil-specific negative that could play out in the near term: despite the mini-correction this week, WTI remains comfortably in the price zone that may ease US production curtailments, which could mean more upward pressure on US inventories and oil sentiment in coming weeks," Stephen Innes, chief global markets analyst at AxiCorp, said in a note June 26.

US commercial crude stocks hit a record 540.82 million barrels in the week ended June 19, latest US Energy Information Administration data showed June 24.