Singapore — 0246 GMT: Crude oil futures rose during mid-morning trade in Asia Feb. 3 after the American Petroleum Institute reported a large draw in US crude inventories, underscoring the bullish sentiment being fostered by improved demand-supply fundamentals across the oil market.
At 10:46 am Singapore time (0246 GMT), the ICE Brent April contract was up 26 cents/b (0.45%) from the Feb. 2 settle at $57.72/b, while the March NYMEX light sweet crude contract was up 27 cents/b (0.49%) at $55.03/b.
The rise in oil futures came after API data released late Feb. 2 showed a sizable 4.26 million-barrel draw in US crude inventories in the week to Jan. 29. The data also indicated a marginal improvement in fundamentals for downstream markets, reporting 240,000-barrel and 1.62 million-barrel draws in US gasoline and distillate inventories, respectively.
The market will look to more comprehensive inventory data due for release by the Energy Information Administration later Feb. 3 for confirmation. If the EIA data validates the API data, oil markets could receive yet another boost.
Oil markets had already been turning bullish as demand in the physical market ticks higher and Saudi Arabia’s 1 million b/d output cut begins to constrict supply.
“Oil continues to strengthen today with Brent just shy of $58/b before profit-taking set in. Considerable activity in the physical market is behind the move,” said Stephen Innes, chief global market strategist at Axi, in a Feb. 3 note.
The slow amelioration of the coronavirus pandemic in parts of the world has inspired further confidence in the demand outlook for oil.
Analysts noted that both infection and hospitalization numbers in the US were declining and that the Biden administration was on track to meet its target of administering 100 million vaccinations in 100 days. China also seems to have stemmed a coronavirus resurgence that had oil analysts worried in January, reporting only 25 infections Feb. 2, a one-month low.
“Crude prices are rallying as the US has turned a critical corner in the fight against COVID-19… the biggest risk remains a setback in Chinese crude demand and so far that does not seem to be happening,” said Edward Moya, senior market analyst at OANDA, in a Feb. 3 note.
The market also has its eyes set on the OPEC+ Joint Ministerial Monitoring Committee meeting scheduled for later Feb. 3, which will provide a preview for the OPEC+ meeting in March, when the alliance is expected to unveil its production plan going forward.
“The big question [for the meeting] is how this rapid price rise might open up another potential can of worms for OPEC as members will want to pump more oil, not to mention US shale will be eager to step on the production accelerators,” Innes said.
