Crude rebounds on improving sentiment amid US-Russia talks

Singapore — 0327 GMT: Crude oil futures rebounded Tuesday morning in Asia after settling at 18-year lows in the previous session, as sentiment improved after US and Russia agreed to hold oil market talks.

At 11.27 am Singapore time (0327 GMT), ICE Brent May crude futures were up 26 cents/b (1.14%) from Monday's settle at $23.02/b, while the NYMEX May light sweet crude contract rose $1.11/b (5.53%) at $21.20/b.

NYMEX May WTI briefly traded below $20/b before settling at $20.09/b Monday, the lowest front-month settle for WTI since February 2002, while ICE May Brent settled at $22.76/b -- the lowest since March 2002.

Lower crude oil prices prompted US President Donald Trump to call on Russian President Vladimir Putin Monday with an agreement that both sides will continue discussion on the global oil market, according to a statement from the Kremlin press office.

"Any sign of Russia/Saudi making nice will be positive for oil. But at this stage, the market is not entirely buying into it," Stephen Innes, APAC market strategist at AxiTrader, said in a note Tuesday.

"But it is an evolving story, and oil prices have recovered above WTI $20 after a chaotic session as risk sentiment has revived more broadly with investors busily assessing progress on containing the virus," he added.

Russia's refusal earlier in March to sign up for an extended production cut proposal, forged by the Saudis in an effort to prop up the market in the face of the coronavirus pandemic, sparked a plunge in the price of oil and refined products.

OPEC+ agreement to cut crude oil production by 1.7 million b/d from December will expire on Tuesday.

Some analysts, however, noted that depleting availability of crude oil storage could hamper recovery for oil prices.

"WTI futures was seen trading briefly below $20 per barrel levels on Monday and with the bias still on the downside as the possibility of crude storage depletion across the globe draws near, this would be one sector to be cautious with regards to," IG market strategist Pan Jingyi wrote in a report Tuesday.

Meanwhile, latest data showed Venezuela's crude production have averaged lower at 590,000 b/d in March, down from 820,000 b/d in February, as wells closed amid falling oil prices while US sanctions against Russia-based companies further limit crude exports.

Without sufficient clients for its diminished production, PDVSA has filled its onshore storage to capacity as well as at its fleet of oil tankers, according to a technical report reviewed by S&P Global Platts.

There are 20 million barrels of Venezuelan crude in inventory seeking markets, of which 14.5 million barrels can be attributed to March output that found no buyers, according to the report.

Initial data also point to an increase in inventories in US as well, analysts said.