Crude oil futures rise in Asia trade on bargain hunting, but drivers remain bearish

New York — 0200 GMT: Crude oil futures were higher in mid-morning trade in Asia Tuesday as bargain hunters emerged following the selloff on Monday, but market drivers remain bearish for both demand and supply.

At 10:00 am Singapore time (0200 GMT), ICE Brent May crude futures were up 56 cents/b (1.86%) from Monday's settle at $30.61/b, while the NYMEX April light sweet crude contract was 99 cents/b (3.45%) higher at $29.69/b.

"Presumably, the market is getting supported by physical bargain hunters... the bounce in Asia could also be due to the front running of a possible China stimulus," AxiCorp's chief market strategist Stephen Innes said in a note Tuesday.

However, the potential for supply to increase and demand to decline further are likely to cap further recovery, market sources said.

"On top of simultaneous supply and demand shocks, the market continues to move linearly as reports of global containment measures and more travel restrictions roll in. All of which suggest rallies will fade," Innes added.

While the rate of new coronavirus cases has slowed in China, it continues to rise elsewhere. There were 179,165 confirmed cases of the virus globally as of Monday, of which 81,032 were in China, according to Johns Hopkins University.

Meanwhile, crude supply is set to increase following the failure of OPEC and its allies to come to a production cut agreement. The failure of the talks has fueled a battle for market share between Saudi Arabia and Russia, and market sources said there was little sign of an agreement in the near term.

"With many countries looking to shut part or whole of its borders in the coming weeks, expect demand for oil fall even further," OCBC analysts said in a note Monday.

"Brent has a strong psychological support at $30/b but if broken, might see it nosedive quickly to $25/b," the analysts added.