0339 GMT: Crude oil futures jumped during mid-morning trade in Asia May 24, as the market grew anxious of another above-normal hurricane season, while paring losses from a selloff during the week ended May 21 due to concerns over an influx of Iranian barrels into the market.
At 11:39 am Singapore time (0339 GMT), the ICE Brent July contract was up 50 cents/b (0.75%) from the May 21 settle at $66.94/b, while the July NYMEX light sweet crude contract was up 60 cents/b (0.94%) at $64.18/b.
This morning's climb came as the specter of supply disruptions during the 2020 Atlantic hurricane season returned to haunt markets, after Subtropical Storm Ana became the first named storm of this year's hurricane season on May 22. While Ana has since been downgraded to a tropical depression by the National Hurricane Center, concerns over upcoming storms may have led markets to price in a small hurricane premium.
These concerns have been exacerbated by a May 20 report from the National Oceanic and Atmospheric Administration's Climate Prediction Center, in which forecasters predicted a "60% chance of an above-normal season, a 30% chance of a near-normal season, and a 10% chance of a below-normal season."
Vandana Hari, CEO of Vanda Insights, told S&P Global Platts May 24 that amid unchanged fundamentals, the volatility in the market could have been due to anxiousness over the upcoming hurricane season, with an overdone selloff in the market last week also providing some bounce.
Iranian President Hassan Rouhani sent oil prices into a tailspin May 20 when he said the "main agreement" to reinstate the Joint Comprehensive Plan of Action has been made, and that only ancillary details need to be worked out before a final deal is struck. In contrast, a US Department of State representative insisted later May 20 that "many challenges" remain.
"The selloff on the JCPOA deal was overdone. With negotiators aiming for talks to conclude this week, it may be overly optimistic to expect a full-fledged deal," Hari said. "Instead, we may see only a framework agreement, which may not have a material impact on supply, capping the upside in prices rather than pushing them lower."
Hari, along with other analysts, also said that oil prices will remain sensitive to macroeconomic factors, as demand-supply fundamentals in the oil markets are expected to hold steady.
Strong economic data has provided some tailwind to the market, underscoring a bullish demand outlook in the west.
The IHS Markit US flash composite PMI for May jumped to a record high 68.1, data released on May 21 showed, up from 63.5 in April. The flash composite PMI for the Eurozone, the bulk of which remain under pandemic lockdowns early in the month, climbed to a 39-month high of 56.9 in May, up from 53.8 in April.
