Crude oil recovered some strength in mid-morning trade in Asia on the back of a weaker US dollar and healthy US economic data, after a steep selloff overnight.
The ICE Brent June contract was up 58 cents/b (0.93%) from the April 5 settlement at $62.73/b. The June NYMEX light sweet crude contract was 61 cents/b higher at $59.29/b. The markers fell $2.71/b and $2.80/b respectively April 5 after OPEC+ abruptly agreed April 1 to loosen its quotas and add more than 2 million b/d into the market by July.
Vandana Hari, CEO of Vanda Insights, told S&P Global Platts said that Yesterday’s selloff was predictable because the preliminary price reaction to OPEC+’s verdict to roll back production cuts was incongruent. The market may have shaken too much on the other side and is correcting today. The US dollar also decreased considerably, and the upbeat US jobs report is reflecting an accelerating recovery in the US.
However, the Crude oil market continues to face headwinds from both demand and supply fundamentals, which may keep a lid on prices, the ANZ analysts said, as the virus cases in countries such as India and the European Union are keeping traders cautious, with any renewed restrictions likely to weigh on demand. On the supply side, the phased rollback of production cuts by OPEC+ and Saudi Arabia is being supplemented by a potential increase in Iranian crude exports, which may leave a surplus if demand recovery does not keep pace.