OIL FUTURES: Crude rises as Middle East tensions overshadow demand concerns

Crude oil futures were higher in midmorning trading in Asia on Aug. 12 as the market awaited Iran's retaliation against Israel, with the intensifying conflict overshadowing crude demand concerns arising from China's economic slowdown and reduced US refinery run rates.

At 11:22 Singapore time (0322 GMT), the ICE October Brent crude oil futures contract rose 12 cents/b (0.15%) to $79.78/b, while the NYMEX September light sweet crude contract was up 24 cents/b (0.31%) at $77.08/b.

Tensions in the Middle East remained high as traders closely monitored the escalating geopolitical situation.

"Traders refocused on geopolitical tensions in the Middle East as Iran and its proxies are likely poised for retaliatory strikes against Israel after the assassination of a top Hamas official on Iranian soil last week," analysts at UOB said.

However, mediators have been working hard for months to forge a ceasefire deal. US, Egypt and Qatar leaders on Aug. 8 urged Israel and Hamas to finalize a ceasefire and hostage release agreement on Aug. 15.

Elsewhere, Libya's National Oil Co. has declared force majeure at its Sharara oil field, which was producing about 250,000 b/d before being shut.

Oil prices have rebounded after falling to a seven-month low due to a sharp selloff in financial markets earlier this week triggered by recession fears, but the weak demand outlook in China and the US continued to weigh on sentiment.

US refiners are reducing their run rates amid lower refining margins, raising concerns about a potential oversupply of crude.

"Marathon Petroleum plans to operate its 13 plants at an average of 90% capacity in [the third quarter]. This follows similar announcements from PBF Energy, Phillips 66 and Valero Energy. Together, these refiners account for 40% of US refining capacity," analysts at ANZ said.

Meanwhile, the number of Americans filing new applications for unemployment benefits fell more than expected for the week ended Aug. 3. Initial claims dropped by 17,000 to a seasonally adjusted 233,000, the US Department of Labor said Aug. 8, countering signs of a weakening labor market.

Traders are keeping an eye on the US inflation data due Aug. 14 to gauge the US economy and the Federal Reserve's potential interest rate cut decision for September. A strong labor market and low inflation could support a rate cut.

OPEC's monthly outlook will be published Aug. 13, followed by the US Energy Information Administration report Aug. 14, which are expected to provide further insights into the demand-supply balance.

Dubai swaps

Dubai crude swaps strengthened while intermonth spreads remained steady in midmorning trading in Asia on Aug. 12 from the previous close.

The October Dubai swap was pegged at $77.59/b at 10 am Singapore time (0200 GMT), up $1.52/b (2.00%) from the Aug. 8 Asian market close.

The September/October Dubai swap intermonth spread was pegged at 62 cents/b at 10 am Singapore time, down 2 cents/b from the Aug. 8 Asian close, and the October/November intermonth spread was pegged at 52 cents/b, up 3 cents/b over the same period.

The October Brent-Dubai exchange of futures for swaps was pegged at $2.19/b, unchanged from the previous close.