Crude oil futures recoup losses after overnight plunge as sentiment remains firm

Crude oil futures were higher in mid-morning Asian trade April 20, with both benchmarks recouping losses after plunging by more than 5% overnight on renewed concerns over global oil demand.

At 10:28 am Singapore time (0228 GMT), the ICE June Brent futures contract was up 75 cents/b (0.7%) from the previous close at $108/b, while the NYMEX May light sweet crude contract rose 69 cents/b (0.67%) at $103.25/b.

After a four-day bull run that saw the front-month ICE Brent crude contract add close to $15/b in value, oil prices were likely ripe for profit-taking, partially contributing to both benchmarks plunging by 5.2% overnight, industry sources said.

Analysts said demand concerns also arose after the International Monetary Fund downgraded its global growth forecast for this year and the next, citing the ongoing war in Ukraine as a factor.

"Renewed lockdowns in China, surging [yields and] economic growth downgrade saw commodities prices coming under pressure," ANZ Research analysts Brian Martin and Daniel Hynes said in an April 20 note.

The IMF, in its World Economic Outlook released April 19, lowered its 2022 and 2023 global growth forecasts to 3.6% citing economic damage stemming from the Russian invasion of Ukraine. The forecast marks a downward revision of 0.8 percentage points and 0.2 percentage points, respectively, from its January forecast.

Nonetheless, oil markets continued to see deteriorating fundamentals, capping any downside for prices.

Libya declared force majeure on crude exports from Marsa el-Brega on April 19, just shortly after it declared force majeure on Mellitah oil exports as well as exports from the Zueitina oil port.

The country has lost more than 500,000 b/d of crude production due to the port closures and field shut-ins, a person familiar with the matter said, adding to the strife-torn country's financial woes at a time of high oil prices.

Analysts with S&P Global said in an April 19 research note that the situation could be similar to Libya's disputed 2014 election where the current rival governments emerged, capping production below 500,000 b/d for nearly two years.

"Disruption risks also stem from a myriad of well-armed militias, which do not answer to any government and could take advantage of political instability to advance their own interests. Risks are skewed to the downside for our forecast of Libyan crude supply at 1 million b/d in 2022," the note said.

In the US, crude oil stocks posted a draw of 4.5 million barrels in the week ended April 15, the American Petroleum Institute said, according to media reports. Analysts polled by S&P Global Commodity Insights April 18 were expecting a draw of 800,000 barrels.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia April 20 from the previous close.

The June Dubai swap was pegged at $101.14/b at 10 am Singapore time (0200 GMT), down $3.73/b (3.56%) from the April 19 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.72/b at 10 am, down 33 cents/b over the same period, and the June-July intermonth spread was pegged at $1.47/b, down 36 cents/b.

The June Brent-Dubai EFS was pegged at $6.30/b, down $1.21/b.