Singapore—0251 GMT: Crude oil futures were rangebound to slightly higher during the mid-morning trade in Asia March 19, as investors looked for a bargain following the panic selling that saw prices plummet overnight.
At 10:51 am Singapore time (0251 GMT), the ICE Brent May contract was up 6 cents/b (0.09%) from the March 18 settle at $63.34/b, while the April NYMEX light sweet crude contract rose 5 cents/b (0.08%) to $60.05/b.Market analysts attributed the rise in oil prices this morning to investors seeking to capitalize on the overnight selloff, which saw the Brent and NYMEX light sweet crude markers fall to $63.28/b and $60.00/b, a correction of 6.94% and 7.12%, respectively.
"It is natural to see some bargain hunting coming in this morning after the massive slump in prices overnight, and oil prices may continue creeping up today as I feel that they have swung a little bit too much the other way," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts on March 19.
Analysts said that the sell off seen overnight was caused by a myriad of bearish factors, which finally came to the fore after lurking in the background for the past weeks.
Hari said the rally in prices observed prior to March 18 selloff had largely discounted the innumerable hurdles to a recovery in global economic activity and oil demand, and the correction was due to the market finally pricing in setbacks such as a halt in vaccinations in European countries, and the emergence of more transmissible coronavirus variants.
"The fear of missing out was driving the rampant buying of oil futures in the preceding weeks, and yesterday we saw the flip-side of the coin - a panic sell off amplified by some technical selling," she said.
Hari was among the analysts who said that the frothy conditions in the broader financial markets amid an uncertain economic narrative have also dampened the sentiment for oil.
"The selloff [was] compounded by risk-off moves in cross-asset correlations, as the market continues to price in tighter financial conditions despite the [Federal Reserve's] effort to suggest the contrary," Stephen Innes, chief global market strategist at Axi, said in a March 19 note.
Analysts were also quick to point out that the rally seen in oil prices early-March was powered by the surprise OPEC+ decision to roll over its production quotas into April, and the threat of an increase in supply following the easing of the coalition's supply cuts continues to loom over the market.
"I suspect the oil market is experiencing a bit of reality check these days as the supercycle bulls might be giving way to the power of spare capacity, as the thought of more barrels coming back continues to provide the medium-term supply headwind," said Innes.
