Crude oil futures dip as 3-day rally loses steam, US consumer confidence falls

Crude oil futures were lower in mid-morning trade in Asia June 29 in a sign that a three-day rally has run out of steam, with latest US consumer confidence data for June falling to the lowest in more than a year.

At 10:09 am Singapore time (0209 GMT), the ICE August Brent futures contract was down 98 cents/b (0.83%) from the previous close at $117/b, while the NYMEX August light sweet crude contract was 69 cents/b (0.62%) lower at $111.07/b.

Oil prices had surged more than 7% over the previous three sessions as supply disruptions in Libya and Ecuador and a reported lack of spare capacity in the UAE and Saudi Arabia boosted sentiment.

Recession fears, however, continued to loom. Data from The Conference Board released June 28 showed US consumer confidence in June fell to the lowest since February 2021, a sign that Americans were growing increasingly pessimistic about the economy.

The Consumer Confidence Index fell to 98.7 in June from 103.2 in May, the board said, while the Expectations Index, a gauge of consumers' short-term economic outlook, fell to 66.4, the lowest level since March 2013.

"Rising prices continue to take a toll on consumer spending intentions, while ongoing rate hikes from the Fed are likely to dim sentiment ahead as well," IG market strategist Yeap Jun Rong said in a June 29 note. "US consumers are clearly pessimistic about the economic outlook, with forward-looking expectations at the lowest level since 2013."

Market watchers were awaiting the OPEC meet later June 29 and the larger OPEC+ group meet June 30 for further cues. Expectations are for the group to stand pat on its policy agreed upon earlier in June for output hikes of 648,000 b/d in July and August.

Analysts said actual output figures will likely be much lower, given group members' difficulties in raising production.

"As we have seen in recent months, it is highly unlikely that the group will be able to boost supply by this amount, given the limited spare capacity amongst members and the expectation that Russian oil output will decline as we move closer to the EU's ban on Russian seaborne crude oil imports," ING analyst Warren Patterson said.

Data from the American Petroleum Institute June 29 showed a large draw in US crude oil stocks in the week ended June 24, while gasoline and distillate stocks were reported to have risen, according to media reports.

Dubai crude swaps and intermonth spreads were mostly higher in mid-morning trade in Asia June 29 from the previous close.

The August Dubai swap was pegged at $105.11/b at 10 am Singapore time (0200 GMT), up 71 cents/b (0.68%) from the June 28 Asian market close.

The July-August Dubai swap intermonth spread was pegged at $4.06/b, up 6 cents/b over the same period, and the August-September spread unchanged at $3.15/b.

The August Brent/Dubai EFS was pegged at $12.22/b at 10 am, up 3 cents/b.