Crude futures dip in Asia trade after late week rally as COVID-19 risks linger

New York — 0205 GMT: Crude oil futures traded lower in mid-morning trade in Asia Monday following a strong rally late last week, as risk factors remain over the COVID-19 pandemic with multiple countries taking tentative steps to ease lockdown restrictions.

At 10:05 am Singapore time (0205 GMT), ICE Brent July crude futures were down 56 cents/b (1.81%) from Friday's settle at $30.41/b, while the NYMEX June light sweet crude contract was 58 cents/b (2.34%) lower at $24.16/b.

Oil futures settled up 5% Friday amid signs of an easing global supply glut, with more producers announcing cuts last week.

However, the rally appeared to have lost steam for the moment as uncertainty remains over how the COVID-19 pandemic will play out in coming weeks as multiple countries take tentative steps to ease lockdown restrictions.

"Oil prices eased after initially punching higher as concerns linger about western countries attempting to reopen their economies, which has triggered some profit-taking in early Asia," AxiCorp chief market strategist Stephen Innes said in a note Monday.

More countries across Europe and Asia are making plans to reopen in phases, but fears of a further wave of new infections remained.

Over the weekend, South Korea ordered all clubs and bars to close after a stream of new cases, while Malaysia extended its partial lockdown, local media reported. China also reported 17 new cases Sunday, the highest daily increase since April 28, reports showed.

The global number of confirmed cases worldwide had surpassed 4.1 million as of early Monday, based on latest available Johns Hopkins University data.

"As global economies continue efforts to ramp up economic activities once again, two biggest near-term risks perhaps persist in the form of Covid-19 case resurgence and further US-China tensions," IG market strategist Pan Jingyi said in a note Monday.

Tensions between the US and China have resurfaced in recent weeks after US President Donald Trump chided China for mishandling the outbreak.

"Still, with evidence the bottom is in, oil bulls will feel more comfortable buying dip as oil fundamentals are showings signs of improvement by the week," Innes said.