Crude steadies after overnight plunge

Singapore — 0200 GMT: Crude oil futures were trading steady to lower in midmorning trade in Asia June 25 following an overnight plunge, with bearish sentiment still weighing on prices.

At 10 am Singapore time (0200 GMT), ICE August Brent crude futures was down 22 cents/b (0.55%) from the June 24 settle at $40.09/b, while the NYMEX August light sweet crude contract was 16 cents/b (0.42%) lower at $37.85/b.

Both the front-month Brent and WTI contracts each declined more than 5% on June 24, the largest single-session slide since June 11.

Weakened demand outlooks and rising US crude stocks are expected to cap optimism in the near term, even as prices steadied this morning after the plunge.

"The dreaded inventory draw confirmation after EIA reported a 1.4 million-barrel increase has weighted on oil like a barrel of lead around the bull's market neck," said Axicorp chief global markets strategist Stephen Innes in a June 25 note.

US commercial crude stocks climbed 1.44 million barrels to a record 540.72 million barrels in the week ended June 19, the US Energy Information Administration data showed June 24.

A decrease in US gasoline stocks provided some hopes of demand recovery, but was not enough to lift prices.

Total US gasoline stocks dipped 1.67 million barrels at 255.32 million barrels in the week ended June 19, the EIA data showed. This narrowed the surplus to the five-year average to lowest since early May, at around 9%.

In contrast, distillate stocks edged 250,000 barrels higher at 174.72 million barrels as demand eased 90,000 b/d to 3.47 million b/d.

"On the demand side, the coronavirus remains the most significant downside variable for oil ... investors may need to reconsider a draconian lockdown policy revival, especially if lawmakers find themselves backed into a corner," Innes added.

Fears of a second wave of new coronavirus cases have threatened oil demand recovery as some countries may have to slow reopening activities.