OIL FUTURES: Crude rises as Beijing hints at easing US-China tensions

Crude oil futures were higher in mid-afternoon Asian trade May 2 as Beijing hinted at easing US-China tariff tensions, while the Energy Information Administration reported a decline in US crude oil inventories.

At 2:48 pm Singapore time (0648 GMT), the ICE July Brent futures contract was up 25 cents/b (0.4%) from the previous close at $62.38/b, while the NYMEX June light sweet crude contract was up 26 cents/b (0.44%) from the previous close at $59.50/b.

China's Commerce Ministry released a press statement saying that Beijing is evaluating the US's latest proposal to start tariff talks with China earlier May 2.

"What the Chinese side wants to emphasize is that in any possible dialogue or talks, if the US does not correct its unilateral tariff measures, it indicates that the US has no sincerity and will further damage mutual trust between the two sides," the press statement said.

Crude oil futures prices thus saw some support as Beijing's statement hinted at the possibility of easing US-China tariff tensions.

"Risk sentiment has returned to more neutral territory after languishing in 'extreme fear' for the past two months," IG's Market Strategist Yeap Jun Rong said. "The rebound has been driven by strong corporate earnings and renewed optimism over trade, following President Trump's remarks about potential agreements with India, Japan and South Korea, as well as a possible deal with China."

The immediate relief from the pause in tariff salvos brought a rebound across markets, analysts said.

Possibly signaling healthy demand for crude oil, inventories in the US fell 2.696 million barrels in the week ended April 25, the latest EIA data showed.

However, this reading directly contradicts the American Petroleum Institute's report that inventories instead rose 3.76 million barrels across the same period.

Analysts noted that optimism remains fragile, and gains in the complex could be capped.

"Households [could be] preparing for higher prices and potential recession, as the latest consumer surveys all pointed to a sharp drop in sentiment and a significant rise in medium- to long-term inflation expectations," Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, said.

US crude oil futures prices fell below the $57/b psychological level following reports that Saudi Arabia is ready to tolerate lower prices.

"But dip buyers quickly stepped in as Trump threatened to expand sanctions on buyers of Iranian crude. Day-to-day moves in crude are tough to catch, but the outlook remains negative given rising supply and weakening demand prospects. A further decline to $50/b is likely," Ozkardeskaya added.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in mid-afternoon Asian trading May 2 from the previous close.

The July Dubai swap was pegged at $61.49/b at 2 pm Singapore time (0600 GMT), down by 13 cents/b (0.21%) from the previous Asian market close.

The June-July Dubai swap intermonth spread was pegged at 35 cents/b, wider by 12 cents/b over the same period, and the July-August Dubai swap intermonth spread was pegged at 17 cents/b, wider by 11 cents/b over the same period.

The July Brent-Dubai exchange of futures for swaps was pegged at 91 cents/b, wider by 36 cents/b over the same period.