Crude oil futures inch higher after 2-day selloff, sentiment remains weak

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Crude oil

Crude oil futures inched higher in mid-morning Asian trade Aug. 17 as investors bought the dip after a second day of steep declines, with sentiment still bearish amid weak economic data and progress on an Iranian nuclear deal.

At 10:08 am Singapore time (0208 GMT), the ICE October Brent futures contract was up 26 cents/b (0.28%) from the previous close at $92.60/b, while the NYMEX September light sweet crude contract was 34 cents/b (0.39%) higher at $86.87/b.

Oil prices overnight fell to the lowest level in more than six months after a raft of bearish headlines saw sentiment sour rapidly, with the front-month ICE Brent crude marker settled at the lowest level since early February.

While analysts noted that discussions over an Iranian nuclear deal could still fall apart at the eleventh hour as was the case in previous negotiations, a resolution could send crude oil prices lower to the $80/b level.

Crude prices are declining over fears China’s growth could slow much more and on improving odds that Iranian crude could flood the market as negotiators near a potential revival of the Iran nuclear deal,” said OANDA senior market analyst Edward Moya in a late Aug. 16 note.

Platts Analytics said Iranian crude exports could rise by as much as 1 million b/d within three months of the end of the fourth quarter should a deal take place in the coming weeks.

US data continued to signal a fragile recovery in the world’s largest economy, with weak housing starts for July contrasting with a rebound in manufacturing output, official data released Aug. 16 showed.

“US housing starts fell to its lowest level since February 2021… but the strong rampup in July factory output still point towards a robust economy,” said IG market strategist Yeap Jun Rong. “The Federal Reserve rate hike path is likely to remain undeterred with 125 basis point increases being priced through the rest of the year.”

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia Aug. 17 from the previous close.

The October Dubai swap was pegged at $87.26/b at 10 am Singapore time (0200 GMT), down 62 cents/b (0.71%) from the Aug. 16 Asian market close.

The September-October Dubai swap intermonth spread was pegged at $1.83/b at 10 am, down 12 cents/b over the same period, and the October-November intermonth spread was pegged at 94 cents/b, down 5 cents/b.

The October Brent/Dubai EFS was pegged at $5.27/b, down 18 cents/b.