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Crude oil futures steady as market takes a breather

Crude oil futures were steady during mid-morning Asian trade Oct. 6 as the market took a breather from the recent rally. However, market participants said the near term outlook remains bullish amid rising demand and tightening supply.

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At 11:25 am Singapore time (0325 GMT), the ICE December Brent futures contract was down 5 cents/b (0.06%) from the previous close at $82.51/b, while the NYMEX November light sweet crude contract was 9 cents/b (0.11%) lower at $78.84/b.

"A breather may be on the cards, though any response to American Petroleum Institute stocks data will likely be transitory and as the market is awaiting confirmation from the Energy Information Administration report," Vandana Hari, CEO of Vanda Insights told S&P Global Platts Oct. 6.

Despite the slight dip in prices, Hari said the recent crude oil rally was underpinned by the energy crisis in Europe and China, which looks set to linger. She added that should the upcoming report from the US Energy Information Administration be bearish, it may not trigger a significant price pullback.

Several analysts have also noted that crude markers have extended their recent uptrend as investors fret about tightness in the market as the energy crisis boosted demand.

"The surging LNG and thermal coal prices are likely to boost switching to oil in the industrial and power generation sectors," ANZ research analysts said in a report published Oct 6.

Meanwhile, Saudi Aramco has said that the shortage in the natural gas market had supported oil demand to the tune of about 500,000 b/d. This comes following OPEC+'s announcement that it would keep to its existing plan and only increase output in November by 400,000 b/d. The increase was well below market's expectations, considering the tight energy supply across the globe. OPEC+ will meet Nov. 4 to review the group's production plans for December.

Global gas prices have also hit record highs in recent weeks, with the S&P Global Platts JKM spot Asian LNG benchmark reaching $34.99/MMBtu and the TTF month-ahead value hitting $32.06/MMBtu on Oct. 4.

Meanwhile, the American Petroleum Institute reported late Oct. 5 that US crude inventories increased 951,000 barrels for the week ended Oct. 1, defying most analysts' forecast for a decline of 300,000 barrels. The API also showed that gasoline inventories jumped by about 3.7 million barrels last week, while distillate stocks increased by about 345,000 barrels.

The market will look to the EIA's stocks report, due for release later Oct. 6, for further pricing cues.