Crude oil futures slide after overnight gains, volatility remains

Singapore — 0224 GMT: Crude oil futures were lower in mid-morning trade in Asia Tuesday, retreating from overnight gains, while sentiment is likely to stay volatile as uncertainty over demand and supply lingered.

At 10:24 am Singapore time (0224 GMT), April ICE Brent crude futures fell 50 cents/b (0.87%) from Monday's settle at $57.17/b, while the NYMEX March light sweet crude contract fell 26 cents/b (0.50%) at $51.79/b.

Oil futures had risen on Monday on cautious optimism, but dipped Tuesday morning as the longer-term impact of the coronavirus outbreak remains uncertain.

"While it's more comfortable to call oil higher, given the likely pent-up demand to lead to a recovery from Q2, it's far too early to suggest oil market concerns have dissipated," AxiCorp's chief market strategist Stephen Innes said Monday.

He added that China's decision to extend the Lunar New Year holiday, on top of transport restrictions and a mandatory 14-day quarantine for returning workers, will hinder a recovery in prices.

While China and other Asian countries have pledged economic stimulus to counter the implications of the Covid-19 outbreak, investor sentiment is likely to remain cautious.

"Stimulatory measures by China and other countries, designed to cushion the impact of the epidemic have eased some demand concerns," ANZ analysts said in a note Monday.

"That said, markets still look cautiously optimistic, as it is difficult to quantify the demand losses to date," the analysts added.

The International Energy Agency last week slashed its oil demand forecast for 2020 by 480,000 b/d, citing the impact of the coronavirus outbreak on China's economy.

Investors are also looking for further cues on the outcome of the proposed OPEC+ cuts of an additional 600,000 b/d.