Crude oil futures were higher in mid-morning trade in Asia June 7 as supply remained tight, with the ICE Brent crude marker once again retaking the $120/b level after failing to settle above it in the previous session.
At 10:33 am Singapore time (0233 GMT), the ICE August Brent futures contract was up 75 cents/b (0.63%) from the previous close at $120.26/b, while the NYMEX July light sweet crude contract rose 75 cents/b (0.63%) at $119.25/b.
Oil prices had failed to hold onto gains in the overnight session despite surging by more than $2/b at the June 6 open, with both ICE Brent and NYMEX crude settling lower on the day by 20 cents/b to 40 cents/b.
Nonetheless, fundamentals remained bullish for oil prices, analysts said. The summer driving season in the West is expected to keep demand for oil robust even as concerns linger over refined product inventories reaching multi-year lows.
“It is difficult to see a significant downside for the market in the coming months,” ING analysts Warren Patterson and Wenyu Yao said in a June 7 note.
“The shunning of Russian oil will continue to tighten the balance, whilst very healthy refinery margins should provide further support to crude prices. There is the potential that refinery margins strengthen even further over the coming months, as we enter a period of seasonally higher demand with low product inventories,” they said.
OCBC Treasury Research analysts said: “The $120/b handle appears to be acting as a support level [for ICE Brent] for now. We remain bullish on oil in the near to medium term.”
Some supply was seen returning in North Africa after Libya’s largest oil field Sharara restarted operations on June 4, sources close to the matter said June 6.
The Sharara field can produce 300,000 b/d of oil at full capacity, though sources said output will likely reach around 200,000 b/d in a few days.
Investors will be keeping an eye on the US Energy Information Administration’s next weekly inventory report out June 8 to further assess the tight supply situation.
Analysts surveyed by S&P Global June 6 expect US gasoline inventories to have risen 2 million barrels in the week ended June 3 to around 221 million barrels, while distillate stocks likely climbed 800,000 barrels to 107.2 million barrels.
US commercial crude stocks likely declined 2.9 million barrels over the week to a 10-week low of 411.8 million barrels, they said.
Dubai crude swaps were higher in mid-morning trade in Asia June 7 from the previous close, though intermonth spreads were lower.
The August Dubai swap was pegged at $108.75/b at 10 am Singapore time (0200 GMT), up 53 cents/b (0.49%) from the June 6 Asian market close.
The July-August Dubai swap intermonth spread was pegged at $2.92/b at 10 am, down 15 cents/b over the same period, and the August-September intermonth spread was pegged at $2.34/b, down 4 cents/b.
The August Brent/Dubai EFS was pegged at $11.61/b, down 40 cents/b.
Source: Spglobal.com
