Crude oil futures gain on expectations of demand destruction flattening out

Singapore — 0214 GMT: Crude oil futures were higher in mid-morning trade in Asia Tuesday amid market expectations that demand destruction following the COVID-19 outbreak has found a floor.

At 10:14 am Singapore time (0214 GMT), ICE Brent July crude futures were up $1.03/b (3.79%) from Monday's settle at $28.23/b, while the NYMEX June light sweet crude contract was $1.31/b (6.42%) higher at $21.70/b.

"Crude oil extended gains from last week amid hopes that the worst is behind it following the devastating level of demand destruction due to COVID-19," ANZ analysts said in a note Tuesday.

This comes amid the reopening of economies as more countries are expected to gradually ease lockdown measures in the next few months.

Meanwhile, a slowing US crude inventory build over the last few weeks also suggested a decline in US production.

While US crude stocks are expected to build for a 15th consecutive week last week, the rate of increase has slowed since early April, when 19.25 million barrels flowed into storage.

However, uncertainty surrounding the OPEC+ supply cut will continue to weigh on sentiment, along with the US-China trade tensions, which has resurfaced once again.

"Looking forward, the key risks to crude oil include renewed US-China hostilities and the persistent issue of storage, especially in the US," OCBC analysts said in a note Tuesday.

Last week, US President Donald Trump threatened to increase tariffs on Chinese goods, which could adversely affect trade between the US and China.

Storage tanks at Cushing, Oklahoma, are approximately 81% full as of the week ended April 24, according to an S&P Global Platts analysis.

Strong demand for crude storage has also filled up tanks in Louisiana, Platts reported previously. A steep contango structure in the crude futures market has incentivized sellers to store crude instead of selling the oil in the spot market.