Crude futures rangebound in Asia trade on OPEC+ compliance as COVID-19 cases rise

Singapore — 0200 GMT: Crude oil futures were steady to lower in mid-morning trade in Asia July 8 as the market continued to be supported by compliance with OPEC+ production cuts, with further gains were capped by rising COVID-19 case counts in the US.

At 10 am Singapore time (0200 GMT), ICE Brent September crude futures were down 11 cents/b (0.26%) from the July 7 settle at $42.97/b, while the NYMEX August light sweet crude contract was 11 cents/b (0.27%) lower at $40.51/b.

The number of confirmed coronavirus cases in the US is nearing 3 million amid a surge in new infections across California, Texas, Florida and Arizona, latest data from John Hopkins University showed. Australia's second-largest city, Melbourne, has also re-imposed strict lockdown measures for six weeks after a spike in infections.

"Oil price rally runs on thin ice amid resurgence of COVID-19 cases," ANZ analysts said in a note July 8.

However expectations of further inventory withdrawals in the US and continued compliance with OPEC+ production cuts was keeping market sentiment positive, providing enough support to keep crude prices rangebound.

OPEC's crude output in June hit a three-decade low of 22.31 million b/d, according to an S&P Global Platts survey. This pushed the group's compliance to 106% of its committed production cuts, up from 85% in May, according to Platt's calculations.

"Without a significant shift in the narrative, price action is floundering as traders become more accustomed to minor retracements and rallies, while taking a more noticably defensive posture, not wanting to run with the bull or bear baton too far ahead of the oil market's immediate economic realities," AxiCorp chief global markets analyst Stephen Innes said in a note July 8.

The US Energy Information Administration in its monthly report published July 7 boosted its 2020 outlook for crude futures and US oil production on OPEC+ supply cuts and rising demand after many regions eased movement restrictions and lifted lockdowns in June.

The EIA now sees Brent prices averaging $40.50/b in 2020 and expects output to average 11.63 million b/d in they year, up 70,000 b/d from its June forecast, and forecast global oil demand contraction will fall to 8.15 million b/d, down from 8.34 million b/d projected last month.