Crude oil futures slide as concerns of demand recovery persist

Singapore — 0217 GMT: Crude oil futures were marginally lower in mid-morning trade in Asia June 16 amid persistent concerns over demand recovery.

At 10:17 am Singapore time, ICE Brent August crude futures was 26 cents/b (0.65%) lower from June 15's settle at $39.46/b, while the NYMEX July light sweet crude contract was 25 cents/b (0.67%) lower at $36.87/b.

Sentiment took a risk-off tone in Asia trading, despite prices settling higher on June 15 during the US trading hours, amid news of additional economic support by the Federal Reserve.

"A full recovery to early March levels will need continued supply discipline, demand recovery, and time to work off US inventories and spare capacity," Axicorp chief global markets strategist Stephen Innes said in a June 16 note.

Concerns over a second wave of COVID-19 infections amid easing lockdowns continued to cloud the demand outlook.

The market is also looking towards fresh US inventory data to be released later in the week. The data last showed a substantial build, which dampened sentiment.

"A tall order indeed that could be prone to less satisfactory results over the short term, but a draw in this week's inventory data will go a long way to soothe supply concerns," Innes said.

On the OPEC+ front, some bullish sentiment emerged from reports that Iraq is adhering to the accord. Baghdad had signaled that it would sharply cut back on oil exports in June, Platts reported.

There were also concerns as to whether US shale production will increase as prices get supported by the OPEC+ cuts.

Meanwhile, the ICE Brent crude futures market structure had remained largely steady at the prompt, amid a lack of fresh drivers at the moment.

"Whether it [ICE Brent] can reverse last week's bearishness and embark on another bullish run remains to be seen, given that the contango spread is still relatively flat now compared to last month," OCBC analysts said in a June 16 note.