Crude oil futures continue to consolidate amid seasonal product demand growth


Crude oil futures continued to consolidate higher in mid-afternoon Asian trade Aug. 4 after a multiday selloff amid seasonal demand growth in the transport and aviation sectors, shrugging off the Bank of England’s interest rate hike to a level not seen since 2008.

At 2:48 pm Singapore time (0648 GMT), the ICE October Brent futures contract was up 71 cents/b or 0.75% from the previous close at $94.83/b, while the NYMEX September light sweet crude contract was 73 cents/b or 0.82% higher at $89.27/b.

“Seasonal demand growth remains the main driver of the tight oil market,” ANZ Research analyst Daniel Hynes and Soni Kumari said in a Aug. 4 note. “Demand indicators have largely held up … global air travel has been robust as more countries reopen international borders,” they added.

Weekly scheduled airline seat capacity rose 500,000 to more than 102 million for the week starting Aug. 1, according to aviation data company OAG, putting global seat capacity 25% above the same week in 2021 and only 14% below 2019 levels.

“Looking forward, it looks like capacity is baked in at more than 100 million for the rest of the month,” OAG senior analyst John Grant said. He forecast the gap between this year’s current planned capacity and 2019 through end October at 7.5%.

Meanwhile, investors shrugged off news of the Bank of England’s biggest interest rate increase in 27 years to 1.75% overnight, the highest level since the global financial crisis in 2008. The BOE said inflation was expected to hit 13% in the fourth quarter and remain elevated in 2023.

Despite the rebound in Asia trade Aug. 5 after a multiday selloff in crude futures, market analysts remained cautious about the possibility of demand destruction as central banks globally continue to pursue aggressive rate hikes to tame high inflation.

Oil prices will continue to face downward pressure, with the possibility that prices could have peaked for the year, they said.

“Brent crude broke below its 2022 uptrend… and it seems unlikely we will see $110/b Brent again this year, barring Eastern European shocks,” OANDA’s senior market analyst Jeffrey Halley said in a Aug. 4 note.