Crude oil futures tick higher after overnight losses; seen rangebound – S&P Global

0300 GMT: Crude oil futures were slightly higher during mid-morning trade in Asia Nov. 11 following heavy overnight losses, which was brought about by the unexpected build in US crude inventories and the sharp rise in the US dollar, as expectations of a fundamentally tight market prevailed.

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At 11 am Singapore time (0300 GMT), the ICE January Brent futures contract was up 12 cents/b (0.15%) from the previous close at $82.76/b, while the NYMEX December light sweet crude contract rose 13 cents/b (0.16%) at $81.47/b.

According to the US Energy Information Administration’s latest data released late Nov. 10, US crude inventories registered a weekly build of 1 million barrels.

“Commercial stockpiles of crude oil rose 1.002 million barrels last week, against expectations of a fall,” ANZ Research analysts Brian Martin and Daniel Hynes said in a Nov. 11 note.

Nevertheless, some indicators which were supportive of demand fundamentals were seen in the EIA’s weekly report, including a decline in distillate inventories and an uptick in refinery utilization.

“Gasoline and distillate inventories posted larger-than-expected declines,” OANDA’s senior market analyst Edward Moya said Nov. 11. “Refinery utilization rose for a third consecutive week, up to 86.7%.”

Adding further pressure to short term oil prices, the US dollar index notched a one-year high amid concerns of inflationary pressures, which typically weighs on oil prices as US-dollar denominated oil futures become relatively more expensive for foreign buyers.

“Inflationary pressures have been showing up this week, with the latest outperformance of the US’ October [Consumer Price Index] raising some doubts to the [Federal Reserve’s] gradual pace of monetary tightening. The US headline CPI has come in at its 30-year high, jumping 6.2% from a year ago,” IG Market Strategist Yeap Jun Rong said in a Nov. 11 note. “With markets aggressively increasing their bets for two rate hikes in 2022 to curb inflationary pressures, the US dollar has reached its one-year high.”

At 11.00 am in Singapore, the US Dollar Index was trading at 94.970, up 0.08% from the previous close at 94.890.

However, the short-term pressures on oil prices, coming from a weekly build in US inventories and the rise in the US dollar, are offset by the outlook that the oil market is fundamentally undersupplied, which is keeping oil prices rangebound as investors view any decline as an opportunity to buy.

“We think oil prices are trading undervalued at the moment and may rise to $85 in the near term,” OCBC Treasury Research analysts said in a Nov. 11 note.

Echoing this sentiment, Moya said: “The oil market deficit is firmly in place and that should prevent WTI crude from seeing a significant pullback.”

OPEC is scheduled to release its monthly oil market report later Nov. 11 and participants are awaiting the report for cues on market fundamentals.