Crude oil futures rise after sharp fall but oversupply caps recovery

Singapore — 0207 GMT: Crude oil futures edged up during mid-morning trade in Asia Wednesday after sharp declines overnight, but oversupply concerns placed a lid on the rise.

At 10:07 am Singapore time (0207 GMT), ICE Brent June crude futures rose 24 cents/b (0.81%) from Tuesday's settle to $29.84/b, while the NYMEX May light sweet crude contract was 31 cents/b (1.54%) higher at $20.42/b.

Prices settled sharply lower Tuesday amid concerns that the OPEC+ cuts would be insufficient to prevent a near-term oil glut.

"Oil prices tumbled more than 10% on Tuesday, with market participants apparently unconvinced that record supply cuts could soon balance markets," UOB analysts said in a note Wednesday. They, however, added that a predicted plunge in US shale output did provide some support to prices.

Texas energy regulators began debating Tuesday whether the state should impose 20% crude output cuts on producers to help stabilize prices amid the global coronavirus pandemic.

This was after OPEC+ agreed to cut production by nearly 10 million b/d, although analysts have said that the cuts will be far short of at least 20 million b/d of expected global demand destruction.

"Even with a new OPEC+ agreement, oil is likely to remain under pressure. While the deal is a vital acknowledgment, a free market for oil is troubling in a COVID-19 world," AxiCorp's chief market strategist Stephen Innes said.

"Markets believe the deal won't come close to offsetting demand devastation and isn't even large enough to eat into what's in storage," Innes added.

A major concern is that US commercial crude storage could fill up as soon as May, causing deeper dips in crude prices.