Crude futures rise in Asia trade on signs of slowing global production

Singapore — 0202 GMT: Crude oil futures were higher in mid-morning trade in Asia Friday as signs of slowing production emerged from OPEC+ producer Kuwait, as well as the US.

At 10:02 am Singapore time (0202 GMT), ICE Brent June crude futures were up 64 cents/b (3%) from Thursday's settle at $21.97/b, while the NYMEX June light sweet crude contract was 83 cents/b (5%) higher at $17.33/b.

Kuwait said Thursday it has begun ramping down its crude production ahead of the implementation of the latest OPEC+ output cut agreement in May.

The 23-member OPEC+ alliance has agreed to collectively cut production by 9.7 million b/d - about 10% of global supply - in May and June, followed by a 7.7 million b/d reduction in the second half of 2020.

Production is also projected to fall further in the US in coming weeks amid a decline in drilling activity. The US oil and gas rig count has fallen 76 week on week to 491, rig data provider Enverus said Thursday.

"We calculate that the number of drill rigs active in the US is now well below that required to maintain production. This will see a natural decline in US output in the weeks and months ahead," ANZ analysts said in a note Friday.

Nonetheless, analysts remained cautious about the outlook for oil as global demand showed little sign of improvement.

"Q2 rebalancing of supply/demand is beyond the reach of even an expanded OPEC+ group production cut, suggesting oil will struggle for traction without a pickup in demand," AxiCorp's chief market strategist Stephen Innes said in a note Friday. "[Investors] remain even more spooked by any negative news due to the unresolved market surplus that will hit unalterable storage capacity in the coming weeks," he added.

Total US commercial crude storage was around 60% full as of last week, while tanks at Cushing stood at around 75% of their total working capacity, Platts analysis showed.