Crude futures steady in Asia trade as caution clouds early-week optimism

Singapore — 0210 GMT: Crude oil futures were stable to slightly higher in mid-morning trade in Asia Wednesday as caution began to cloud the optimism that fuelled a price rally earlier in the week.

At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures were up 11 cents/b (0.32%) from Tuesday's settle at $34.76/b, while the NYMEX July light sweet crude contract was 3 cents/b (0.09%) higher at $31.99/b.

"Sentiment in commodity markets remains positive, although doubts about the sustainability of the recent rally are emerging," ANZ analysts said in a note Wednesday.

Prices have rallied in recent days amid an improving macroeconomic outlook, with signs of an easing supply glut and the gradual lifting of coronavirus lockdowns globally. Nonetheless, the rally appeared to have stalled Wednesday as economic uncertainty remains a major concern.

"Crude oil prices gave up earlier gains amid concerns about the long-lasting economic damage the coronavirus has caused," the ANZ analysts said. "Powell's comments about the risks of long-term unemployment offset the positives coming from various US states easing restrictions in the hope of restarting their economies," they added.

US Federal Reserve chief Jerome Powell warned Tuesday that the outlook for the US economy was bearish, according to media reports.

Earlier news on the progress being made in a COVID-19 vaccine had initially fuelled gains in the market, but the rally lost steam due to a lack of clarity on specific details and how this will pan out in the longer term.

"With Brent hitting the resistance level of $35/b over the past two days, we think it will require a stronger catalyst for oil to edge higher from here," OCBC analysts said in a note Wednesday.

Market participants will be closely watching the release of fresh US oil inventory data due later in the day for cues after last week's data pointed to a decrease in US production.