Singapore — 0324 GMT: Crude oil futures were slightly higher, but rangebound, during mid-morning trade in Asia May 18, as optimism over increased oil demand from the US and Europe kept the market afloat.
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At 11:24 am Singapore time (0324 GMT), the ICE Brent July contract was up 17 cents/b (0.24%) from the May 17 settle at $69.63/b, while the June NYMEX light sweet crude contract was up 10 cents/b (0.15%) at $66.37/b.
The market brushed aside news of Asia's worsening COVID-19 situation and turned its attention towards the recovery in the US, where a rebound in economic activity has propped up downstream oil product demand.
Apple mobility data showed that US driving activity was up by around 1% in the week to May 14, reaching a nine-month high that is 142.04% of the January 2020 baseline.
Furthermore, the US Transportation Security Administration said the number of people passing through US airports on May 16 was 1.85 million, the highest since March 2020. This is just 30% lower than the equivalent seen on the same day in May 2019, indicating that US domestic air travel demand is recovering.
The market is also optimistic of Europe's prospective oil demand as major economies are gradually easing their mobility restrictions. The UK took a major step out of its lockdown on May 17, allowing social gatherings in limited numbers, activities such as indoor dining and replacing the ban on international travel with a more lenient set of rules.
Meanwhile, Italy, on May 17, announced it is pushing back its nightly coronavirus curfew by an hour to 11 pm from May 18 and is easing other mobility restrictions in areas where infections are low. France is also set to push back its nightly curfew by two hours to 9 pm from May 19, while lifting some restrictions on leisure venues and outdoor dining.
Over in Asia, concerns over renewed mobility restrictions in India, Japan and Southeast Asia were mollified by hopes that oil demand from the region's economic powerhouse China will remain strong.
"Strength in crude oil demand in China was bullish for prices. China processed a record 232 million mt of crude from January-April, up 12% from the same period in 2019 prior to the pandemic," Avtar Sandu, senior commodities manager at Phillips Futures, said in a May 18 note.
Sandu also added that a weakening US dollar lent support to the market. A weaker US dollar makes dollar-denominated assets such as oil cheaper for buyers holding foreign currencies, and hence boost their demand.
At 11:11 am, the June contract for the ICE US dollar index was seen trading at 90.090, 2.52% lower from the previous settle, as the market bought into the view that the US Federal Reserve will likely tolerate the spike in inflation, and refrain from tightening monetary policy in the near-term.