Crude futures rebound in Asia trade after sharp decline, but uncertainty lingers

Singapore — 0220 GMT: Crude oil futures rebounded in mid-morning trade in Asia Wednesday after settling sharply lower Tuesday, but uncertainty lingers as countries outside China struggle to contain the coronavirus spread, analysts said.

At 10:20 am Singapore time (0220 GMT), April ICE Brent crude futures were up 34 cents/b (0.62%) from Tuesday's settle at $55.29/b, while the NYMEX April light sweet crude contract was 42 cents/b (0.84%) higher at $50.32/b.

April ICE Brent had settled more than 2% lower Tuesday and NYMEX April 3% lower, below the $50/b level for the first time since February 11.

While technical short covering and supply-side factors have capped declines for the moment, analysts said the near-term outlook was likely to remain volatile.

"The shift in focus from just an external demand shock from China to an overwhelming US economic blow could send oil prices into a faster tailspin," AxiCorp's chief market strategist Stephen Innes said.

There have been 80,238 cases of coronavirus confirmed in 34 countries, according to World Health Organization data released Tuesday.

On the supply side, Saudi energy minister Prince Abdulaziz bin Salman Tuesday said his Russian counterpart Alexander Novak was still engaged in talks but had no update on whether a consensus on production cuts was in sight.

Novak has been reluctant to commit to additional supply curbs, citing the uncertainty of demand forecasts.

"A continued selloff on Wall Street has put pressure on energy prices. The April-May Brent spread, however, remains in backwardation, suggesting that near term supply remains tight," OCBC analyts said in a note Wednesday.

At Tuesday's Asian close, the April/May timespread for Brent swaps was down 2 cents/b from Monday's Asian close at plus 13 cents/b, Platts data showed.

Nonetheless, the data showed that the backwardation in the timespread has eased in recent days as bearish drivers persisted in the market.