Crude gains but market outlook remains weak

Singapore — Crude oil futures were higher in Asia afternoon trade Tuesday, but analysts remained cautious saying the overall market sentiment still remained weak.

At 2:17 pm Singapore time (0617 GMT), the April ICE Brent crude futures rose 76 cents/b (1.43%) from Monday's settle at $54.03/b, while the NYMEX March light sweet crude contract rose 62 cents/b (1.25%) at $50.19/b.

"I am hesitant to call it [oil price recovery] a recovery. It is barely perceptible, a very small bounce after an extended slump," Vishnu Varathan, senior economist and head at Mizuho Bank, said Tuesday.

"It is basically price adjustment due to the slowing pace in new [coronavirus outbreak] cases and the recovery rate versus the death rate," he added.

His view was shared by Samuel Siew, investment analyst at Philip Futures, in a note Tuesday.

"We are not as optimistic, given that the number of new cases across other nations are still growing, and fear of the spread still remains largely apparent," he said.

As the coronavirus outbreak wears on, analysts point out that the worse is yet to be over, with any recovery in oil prices likely to remain a drop in the ocean unless the outbreak abates.

"For now, the coronavirus situation appears to be a spark that could potentially become a huge fire if not properly controlled," Samuel Siew said in his note.

"I'm not convinced that we've seen a floor yet," Vishnu Varathan said. "There is still an underlying [weak] sentiment in oil," he continued.

According to the latest situation report from the World Health Organization, no new countries have reported cases within the last 24 hours.

In a daily briefing Tuesday, China's National Health Commission revealed that as of midnight Monday, it had received 42,638 reports of confirmed cases, and 1,016 deaths.

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

As of 0617 GMT, the US Dollar Index was up 0.07% at 98.760.

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

--Edited by Debiprasad Nayak, debiprasad.nayak@spglobal.com