Crude futures stable in Asia trade amid cautious optimism after overnight rally

Singapore — 0210 GMT: Crude oil futures were largely stable in mid-morning trade in Asia Wednesday amid cautious optimism after a price rally overnight.

At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures were up 8 cents/b (0.26%) from Tuesday's settle at $31.05/b, while the NYMEX June light sweet crude contract was 1 cent/b (0.04%) higher at $24.57/b.

ICE Brent July settled up $3.77/b day on day at $30.97/b overnight Tuesday, while the NYMEX June contract settled $4.17/b higher at $24.56/b.

"Despite the move higher in both oil and equity markets overnight, traders remain extremely cautious at current levels," AxiCorp's chief market strategist Stephen Innes said in a note Wednesday. "The virus situation remains extremely fluid, while heightened US-China tensions are taking their toll on sentiment," he added.

An easing of lockdowns and more output cut announcements by producers led to a price rally Tuesday, but the market remains cautious due to renewed tensions between the US and China after US President Trump threatened to remove global supply chains from China by imposing more tariffs on Chinese goods.

"With Trump and company still on the Wuhan Lab rampage, traders are incredibly cautious this morning... the one that would hurt the most would be for China to reduce imports of US oil," Innes said.

It is also unclear whether other non-OPEC producers would cut production, even as almost 10 million b/d is set to exit the market as the new OPEC+ cuts kick in, analysts said.

However, some optimism was being sustained for the moment amid the start of the OPEC+ supply cuts and a gradual rebound in oil demand from easing lockdowns globally, the analysts said.

"Oil extended its recovery run on hopes that OPEC+ production cuts, which came into effect on May 1, will trim the supply glut, while demand will be gradually underpinned as economies tiptoe towards reopening," UOB analysts said in a note Wednesday.