OIL FUTURES: Crude up on larger-than-anticipated US crude stock drawdown

Crude oil futures were higher in midafternoon Asian trade Aug. 7 as a larger-than-expected decline in US crude oil inventories, alongside healthy import and export data from China, lifted market sentiment.

At 3:00 pm Singapore time (0700 GMT), the ICE October Brent futures contract was up by 42 cents/b, (0.63%) from the previous close at $67.31/b, while the NYMEX September light sweet crude contract was up by 40 cents/b (0.62%) from the previous close at $64.75/b.

The US Energy Information Administration's report of a 3.029-million-barrel draw in US crude oil inventories for the week ended Aug. 1 surpassed market expectations of a 1.1-million-barrel decline, bolstering the bullishness.

The American Petroleum Institute reported earlier on Aug. 6 a sharper decline of 4.2 million barrels over the same period, reversing the previous week's 1.539-million-barrel build.

In the East, China's exports rose 7.2% year over year in July, accelerating from a 5.8% year-over-year gain in June, data from the General Administration of Customs showed Aug. 7. Imports rose 4.1% over the same period in July, defying expectations of a 1.0% decline, the data showed.

Healthy export and import prints for July signal healthy demand from the world's largest crude importer, thereby adding cheer to the market.

Elsewhere, US President Donald Trump imposed an additional 25% on India -- effectively doubling tariffs to 50% -- on account of the latter's Russian crude imports, furthering uncertainty in the market.

"India has very unexpectedly been relegated to whipping boy status in US' geoeconomic assaults despite close and cordial Modi-Trump relations and more importantly, India's strategic importance for US geopolitical objectives," Vishnu Varathan, managing director at Mizuho, said.

The additional duties will come into effect 21 days after Aug. 7, and markets are already pricing in downstream effects on trade flows.

"Interestingly, China, another major buyer of Russian oil, has thus far avoided similar tariff action, leaving the market to speculate on whether Trump's threats will translate into broader policy action," Priyanka Sachdeva, senior market analyst at Phillip Nova, said.

Mizuho's Varathan noted that Beijing, "which is presumably the key target of US geoeconomic assaults", appeared to receive more balanced trade concessions instead.

"This stark reversal of India-China fortunes vis-à-vis the US prompts some degree of cognitive dissonance. And arguably is unsettling even... such mercurial US unilateralism lays bare danger[ously] flawed gambits on global trade-security alignments, which are associated with dire geo-economic miscalculations," Varathan from Mizuho added.

It then becomes difficult to logically anticipate and respond to evolving US geoeconomic threats, where headlines overshadow usual fundamental cues.

"Technically, [US] crude has now broken below its 100-[day moving average] support, with [US crude] futures hovering below $65/b, raising alarms. Oil is once again reminding markets that geopolitics and policy "headlines" can override fundamentals—and in a Trump 2.0 world, tariff threats may shape the next leg of price action more than barrels in the ground," Sachdeva of Phillip Nova, said.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in the midafternoon Asian trading Aug. 7 from the previous close.

The October Dubai swap was pegged at $66.62/b at 2:00 pm Singapore time (0600 GMT), down by 97 cents/b (1.44%) from the previous Asian market close.

The September-October Dubai swap intermonth spread was pegged at 95 cents/b, wider by 3 cents/b over the same period, and the October-November Dubai swap intermonth spread was pegged at 69 cents/b, unchanged over the same period.

The October Brent-Dubai exchange of futures for swaps was pegged at 64 cents/b, narrower by 22 cents/b over the same period.