Crude futures dip in Asia trade on signs of growing US-China tensions

Singapore — 0215 GMT: Crude oil futures were lower in mid-morning trade in Asia Monday amid signs of growing tensions between the US and China over the coronavirus pandemic.

At 10:15 am Singapore time (0215 GMT), ICE Brent July crude futures were down 53 cents/b (2%) from Friday's settle at $25.91/b, while the NYMEX June light sweet crude contract was $1.33/b (6.72%) lower at $18.45/b.

US President Donald Trump said Sunday he believed a "mistake" in China was the cause of the coronavirus' spread, claiming that he has evidence of it, but provided no further details, according to media reports.

Earlier, Trump had threatened to consider raising tariffs on Chinese goods, which could potentially spark another round of trade tensions between the US and China.

"Risk sentiment remains frail going into a fresh start following US earnings concerns and renewed tensions that appear to be brewing between the US and China," IG market strategist Pan Jingyi said in a note Monday.

Some signs of an easing supply glut capped the downside to prices, with OPEC+ production cuts kicking in May 1 and a decline in US drilling activity.

OPEC+ agreed in April to reduce production by 9.7 million b/d in May and June, followed by a 7.7 million b/d drop over July-December and 5.8 million b/d drop from January 2021 to end April 2022.

The US oil and gas rig count has also fallen in recent weeks as upstream players idled rigs in response to lower crude prices. The count fell 59 to 432 in the week ended April 29, rig data provider Enverus said Thursday. The decline was mainly in the number of rigs chasing oil, which fell by 56 to 315.

"US drillers continue to be squeezed between oversupply and under demand... in the previous seven weeks, oil and gas rigs combined have shed a total of 384 platforms," AxiCorp's chief market strategist Stephen Innes said Monday.

"As risk rises in the east, oil traders will likely be tentative to build up that bullish muster in exceptionally low liquidity to challenge the bears this morning, although oil fundamentals are on firmer ground," he added.