Crude futures slip as oversupply, demand concerns resurface

Singapore — 0215 GMT: Crude oil futures were lower in mid-morning trade in Asia Monday as oversupply concerns and doubts of demand recovery take center stage again.

At 10:15 am Singapore time (0215 GMT), ICE Brent June crude futures fell 26 cents/b (0.93%) from Friday's settle to $27.82/b, while the NYMEX May light sweet crude contract was $2.66/b (14.56%) lower at $15.61/b.

The sharp decline in front-month WTI continues Monday, after having settled at a fresh 18-year low Friday as near-term oversupply concerns prompted selling of prompt-dated contracts.

Market concerns have prevailed over the inadequacy of the recent OPEC+ deal to balance out the sharp decline in oil demand after the COVID-19 outbreak.

"Brent [has] closed below $30/b since last Tuesday, as fears of oversupply in the market have resurfaced to render the OPEC+ cuts ineffective," OCBC analysts said in a note Monday.

"We maintain our view that oil prices are expected to face selling pressure until the coronavirus episode shows stronger signs of stabilization," the analysts added.

While more countries are looking to gradually reopen businesses and ease lockdown measures, demand recovery remains capped.

S&P Global Platts Analytics now sees 2020 global oil demand contracting by 7.8 million b/d compared with a 4.5 million b/d decrease in its March outlook.

In contrast, the latest OPEC+ agreement will only be reining in 9.7 million b/d of crude oil production for May and June.

"It hasn't taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets," AxiCorp's chief market strategist Stephen Innes said in a note Monday.

"Brent cargoes are also trading at huge discounts as no one wants to take delivery, given the price of storage could effectively be more expensive than oil prices when dealt with end-users," Innes added.