Crude steady as equities market finds support

Singapore — Crude oil futures were steady in afternoon Asia trade Monday after the equities market firmed, but analysts pointed out that global indices were still sensitive to headlines on the coronavirus outbreak.

At 2:30 pm Singapore time (0630 GMT), the April ICE Brent crude futures rose 4 cents/b (0.07%) from Friday's settle at $54.51/b, while the NYMEX March light sweet crude contract rose 5 cents/b (0.10%) at $50.37/b.

"After Asian futures opened, some recovery strength was observed, with the PBOC offering its first batch of special re-lending funds as it seeks to combat the outbreak. China has too stated that it will spend at least US$10 billion to control the current situation," said Samuel Siew, investment analyst at Phillip Futures.

Siew, however, pointed out that they remained cautious, given that global indices are sensitive to virus headlines and that markets would closely gauge the potential level of disruption going forward.

Further support came after Iran voiced out support on production cuts that have been approved by the majority of OPEC members. "How much they cut, we will support," Iranian oil minister Bijan Zanganeh said Saturday, adding:

"Anything that the majority reaches, we support. We support those who want to decrease."

That said, oil prices were further supported as OPEC's crude production plunged by 470,000 b/d in January, the latest S&P Global Platts survey showed.

OPEC pumped 29.08 million b/d last month, down from 29.55 million b/d in December 2019 as eight of its members posted falls. But with the coronavirus still spreading and denting global oil demand, OPEC is under pressure to cut production even further.

That said, analysts warned that despite OPEC's effort to curb production, it may not be enough to sufficiently halt a slide in oil prices.

"[Production cuts have] failed to alleviate the pressure on oil, in part because the proposal has yet to be formally discussed by OPEC ministers and because Russia continues to push back against further cuts," Stephen Innes, chief market strategist at AxiCorp, said in a note Monday.

Additionally, OPEC's total share of the oil market has fallen to 35% and they no longer have a monopoly on oil prices, suggesting even with OPEC production cuts, non-OPEC nations could still pump and monetize barrels, he added.

Market participants will look to fresh cues from the inventory report by the American Petroleum Institute and the US Energy Information Administration, due later Tuesday and Wednesday, respectively.

--Benjamin Yap, benjamin.yap@spglobal.com

--Edited by Manish Parashar, manishparashar@spglobal.com