OIL FUTURES: Crude recedes from 10-week highs as US-China tensions weigh

Singapore — 0210 GMT: Crude oil futures traded lower in mid-morning trade in Asia Wednesday, stepping back from a 10-week high hit overnight, on growing geopolitical tensions between the US and China.

At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures fell 36 cents/b (1%) from Tuesday's settle at $35.81/b, while the NYMEX July light sweet crude contract was 46 cents/b (1.34%) lower at $33.89/b.

"Optimism nestled within the markets at the start of the week, carried by reopening hopes, though fresh aggravating news on US-China relations appears to be changing the mood going into midweek," IG market strategist Pan Jingyi said in a note Wednesday.

Crude futures hit 10-week high Tuesday, amid hopes the continued reopening of economies could bring balance to oversupplied oil markets in coming weeks.

Nonetheless, oil pared gains amid growing tensions between the US and China over the origins of coronavirus.

Earlier in the week, US President Donald Trump warned that Washington was considering sanctions on China for its crackdown on Hong Kong, according to media reports.

This came after China's announcement at its National People's Congress in Beijing, saying it would pass a national security law on Hong Kong this summer.

"The fact of the matter is that it could remain a bumpy ride in the sessions ahead as the situation evolve," Pan said with regards to Asian markets.

Meanwhile, analysts surveyed by S&P Global Platts are expecting total commercial crude inventories to decline 1.2 million barrels during the week ended May 22 to around 525.3 million barrels.

While this seemed like a third straight week of falling inventory levels, the nationwide surplus to the five-year average is still expected to increase to around 10.7% from 10.1% the week prior, Platts reported.