Crude oil futures recover on tight supply, bullish OPEC report

Crude oil futures were up in mid-morning Asian trade June 15, with sentiment supported by tight supply amid a forecast of global demand growth by OPEC.

At 11:09 am Singapore time (0309 GMT), the ICE August Brent futures contract was up 14 cents/b (0.12%) from the previous close at $121.31/b, while the NYMEX July light sweet crude contract rose 20 cents/b (0.17%) at $119.13/b.

In a report released June 14, OPEC said it expects global oil demand to rise by 3.36 million b/d in 2022, exceeding pre-pandemic levels. The report also forecast Russian output to fall 250,000 b/d from the May projection to 10.63 million b/d for 2022, down 170,000 b/d on the year.

It was the first acknowledgment by OPEC that Russia, its key ally in a production agreement forged in 2017, will see a contraction in output year on year due to sanctions imposed by many Western countries over Moscow's invasion of Ukraine.

"It will be important to monitor how consumers deal with a shortfall in supply of agricultural products from Ukraine and Russia, and what consequences a potential decline in Russian fossil fuel exports to G7 economies could have for energy supplies, energy prices and consequently global economic growth," OPEC said.

The recovery in futures followed a fall in prices in early afternoon US trading on profit taking ahead of the US Federal Reserve's Open Market Committee interest rate announcement expected June 15.

Gains were however, modest as investors still grappled with growing concerns of a possible global recession on the back of stagnant economic growth, high inflation and an aggressive stance by central bank to tighten monetary policy.

"The outlook for oil cannot remain uncorrelated to sentiment and the not-so-rude health of the global economy over time," SPI Asset Management's Managing Partner Stephen Innes said in a June 15 note.

On the US supply side, the American Petroleum Institute report late June 14 indicated that crude inventories rose 736,000 barrels in the week ended June 10. Over the same period, gasoline stockpiles are expected to decline 2.2 million barrels, while distillate stockpiles rose 234,000 barrels.

"With summer drivers still lining up for gas regardless of price amid ongoing supply problems, oil prices remain relatively robust despite growing uncertainty for the global economy," Innes said.

Market participants will closely track the official US weekly stocks report by the EIA due for release later June 15 for further pricing cues.

Dubai crude swaps and intermonth spreads were mostly lower in mid-morning trade in Asia June 15 from the previous close.

The August Dubai swap was pegged at $109.00/b at 10 am Singapore time (0200 GMT), down $2.10/b (1.89%) from the June 14 Asian market close.

The July-August Dubai swap intermonth spread was pegged at $3.51/b at 10 am, down 5 cents/b over the same period, and the August-September intermonth spread was pegged at $2.52/b, down 11 cents/b.

The August Brent/Dubai EFS was pegged at $12.35/b, up 18 cents/b.