0255 GMT: Crude oil futures were trading mixed in mid-morning trade in Asia Wednesday, after touching multi-year lows earlier this week, as oversupply concerns in the wake of the coronavirus pandemic continued to weigh on demand.
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At 10:55 am Singapore time (0255 GMT), ICE Brent June crude futures were down 48 cents/b (1.82%) from Tuesday’s settle at $25.87/b, while the NYMEX May light sweet crude contract was 6 cents/b (0.29%) higher at $20.54/b.
Saudi Arabia, the de facto leader of OPEC, has announced that it plans to raise its production by about a third and supply a record 12.3 million b/d of crude to the market starting in April.
This followed shortly after Russia in early March declined to go along with an OPEC proposal for production cuts to prop up prices.
“Arguably traders were positioned for oil to move lower today with Saudi set to unleash a flood of oil in the market… [but] it does feel like the Trump intervention trade is acting like a plank on the market,” AxiCorp’s chief market strategist Stephen Innes said in a note Wednesday.
US President Donald Trump said Tuesday he would continue talks with Saudi Arabia and Russia to “see what we can do” to resolve the oil price war that threatens US shale producers.
“We could be seeing some early morning profit taking setting in, but I’m not so sure the London market will be so kind, and the seller is likely to emerge sooner than later,” Innes added.
With Saudi Arabia and Russia in a price war to flood the market with cheap crude, and refiners cutting runs on low demand, the crude contango has widened, encouraging global inventory builds.
The price war comes at a time when the global crude demand has been crippled by the coronavirus-induced lockdowns.
Over the next few months, S&P Global Platts Analytics sees global “massive” crude stock builds of 500 million barrels in its best case scenario. This compares with a 1 billion-barrel build in its worst case scenario, relative to end February levels.