Crude rebounds after heavy selloff, outlook volatile

Crude oil futures rebounded in mid-morning trade in Asia Friday, after settling down 2.5% overnight due to a heavy selloff, with the near-term outlook appearing similarly volatile amid developments in the coronavirus outbreak, analysts said.

At 10:56 am Singapore time (0256 GMT), March ICE Brent crude futures were up 90 cents/b (1.54%) from Thursday's settle at $59.19/b, while the NYMEX March light sweet crude contract was $1.06/b (2.03%) higher at $53.20/b.

Market participants continue to focus on trying to gauge the extent of demand impacted by the coronavirus. The World Health Organization Thursday declared the outbreak a "public health emergency of international concern."

However, analysts said there was potential for prices to recover following recent aggressive selloffs.

"Shorts were covered very aggressively into the NYMEX close as a global pandemic appears less imminent for now," said Stephen Innes, chief market strategist at AxiCorp.

"But the key for the move to extend will be the interpretation of peak contagion as viewed through the spread of the virus slowing each day... the next 24-72 hours could be critical for a near term oil price comeback," he added.

The market is also monitoring developments ahead of the upcoming OPEC+ meeting amid discussion about rescheduling it to early February from March. Nonetheless, whether deeper cuts would have a timely impact on prices remained unclear.

OPEC and its 10 allies are one month in to their latest production accord, which commits them to a 1.7 million b/d cut through end March, S&P Global Platts reported earlier.

Overall market sentiment in Asia remains choppy amid fears of an economic contraction in China due to the coronavirus' spread.

"Volatility ensues with the coronavirus developments affecting market sentiment and as investors attempt to gauge the implications amid the uncertainties," said Pan Jingyi, market strategist at IG.

As of 0256 GMT, the US Dollar Index rose 0.05% to 97.725.