Crude oil futures were higher in mid-morning Asian trade Jan. 30 as investors kept watch on the possibility of retaliatory strikes by the US amid elevated tensions in the Middle East coupled with expectations of a drawdown in US crude inventories.
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Register NowAt 11:18 am Singapore time (0318 GMT), the ICE March Brent futures contract was up 24 cents/b (0.29%) from the previous close at $82.64/b, while the NYMEX March light sweet crude contract rose 25 cents/b (0.33%) at $77.03/b.
Middle East tensions remained elevated following the denial by the Iranian Foreign Ministry on Jan. 29 of its involvement behind the attack on US forces in Jordan which resulted in multiple casualties on Jan. 28, state media reported.
"Tensions are likely to keep oil traders on edge with market chatter hinting that Biden could be expected to authorize US military strikes in the Middle East in the US evening today," SAXO's APAC Strategy Team said Jan. 30.
The White House was mulling various responses to the attack, according to media reports. National Security Council Coordinator for Strategic Communications John Kirby, speaking at a White House press briefing Jan. 29, refused to comment whether these responses could include strikes on Iranian soil. Instead, Kirby said: "We are not looking for a war with Iran, we are not looking to escalate."
"The Biden administration may remain cautious of an oil price spike ahead of the US elections this year and could probably choose sanctions over a military response with plenty of space capacity available from GCC [Gulf Co-operation Council] members," SAXO's analysts added.
US crude stocks
US commercial crude stocks likely declined 2.3 million barrels to 418.4 million barrels in the week to Jan. 26, analysts surveyed by S&P Global Commodity Insights said late Jan. 29, putting stocks at the lowest outright level since late September and around 6% below the five-year average of US Energy Information Administration data, opening the widest deficit to the average since December 2022.
The drawdown comes amid lingering production outages and strong refinery demand, the analysts added.
Nationwide gasoline stocks are expected to have declined 450,000 barrels to around 252.5 million barrels over the same period, holding around 0.5% above the five-year average, while distillate stocks are expected to dip 700,000 barrels to 132.6 million barrels, holding steady at slightly more than 3% below average for the third straight week.
More definitive numbers are due for release by the American Petroleum Institute later Jan. 30 and the US Energy Information Administration Jan. 31.
In Asian economic news, Japan's December jobless rate inched down to 2.4% compared to 2.5% the month prior, latest government data showed Jan. 30, suggesting that the labor market at Asia's fourth largest crude importer remained tight.
Despite the slight easing, analysts remained skeptical that Japan's labor market conditions have improved.
"We still see solid wage growth potential for FY 2024, especially boosted by various policy support measures and we expect the BoJ's first rate hike in 2Q24," ING's Robert Carnell and Min Joo Kang said Jan. 30.
Dubai crude
Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia Jan. 30 from the previous close.
The March Dubai swap was pegged at $81.25/b at 10 am Singapore time (0200 GMT), down 73 cents/b (0.89%) from the Jan. 29 Asian market close.
The February/March Dubai swap intermonth spread was pegged at 25 cents/b at 10 am, down 8 cents/b over the same period, and the March/April intermonth spread was pegged at 38 cents/b, down 4 cents/b.
The March Brent/Dubai EFS was pegged at $1.53/b, down 26 cents/b.