Crude futures dip in Asia trade as uncertainty clouds market outlook

Singapore — 0210 GMT: Crude oil futures traded lower in mid-morning trade in Asia June 1 as uncertainty around OPEC+ production cut compliance and post-lockdown demand recovery continued to cloud the outlook.

At 10:10 am Singapore time (0210 GMT), ICE Brent August crude futures were down 24 cents/b (0.63%) from Friday's settle at $37.60/b, while the NYMEX July light sweet crude contract was 23 cents/b (0.65%) lower at $35.26/b.

Focus remained on the upcoming OPEC+ meeting after recent reports suggested that Russia may unwind its production cuts in July.

"Doubts remain that Russia might not go along with an OPEC decision to extend the duration of the initial two-month period of deepest production cuts within the OPEC+ agreement," AxiCorp chief global markets strategist Stephen Innes said in a note Monday.

OPEC+ ministers are considering moving up their meeting to June 4 from the previously scheduled June 9-10 so that July nominations can factor in any changes to oil production quotas, S&P Global Platts reported Sunday.

The first month of the OPEC+ accord calls for a total of 9.7 million b/d in production cuts for May and June, easing to 7.7 million b/d over the second half of 2020 and then 5.8 million b/d for January 2021 through April 2022.

Apart from supply uncertainty, concerns also revolved around demand recovery amid the easing of restrictions and economic reopenings following lockdowns in multiple countries to contain the COVID-19 pandemic.

"The builds in distillates have been particularly quick and worrisome. Unless it reverses this week, it may act as a headwind to further near-term improvement in crude prices," Innes said with reference to latest US inventory data.

Despite the easing of containment efforts, global oil demand recovery remains hampered by fears of a second wave of infections while vaccine development was still underway.

Trade tensions between the US and China also lingered, even though US President Donald Trump did not lay out any new policies or sanctions on China Friday during a closely-watched media conference.