Oil prices climb as US ramps up economic support measures

CNBC

Reuters
KEY POINTS
  • Brent crude oil futures for May delivery rose by 62 cents, or 2.3%, to $27.65 a barrel by 0346 GMT while West Texas Intermediate (WTI) crude futures gained 76 cents, or 3.3%, to $24.12.
  • Both price benchmarks had risen over $1 earlier before pulling back slightly.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices rose on Tuesday on hopes that the United States will reach a deal soon on a $2 trillion coronavirus aid package which could blunt the economic impact of the outbreak and in turn support oil demand.

Brent crude oil futures for May delivery rose by 62 cents, or 2.3%, to $27.65 a barrel by 0346 GMT while West Texas Intermediate (WTI) crude futures gained 76 cents, or 3.3%, to $24.12. Both price benchmarks had risen over $1 earlier before pulling back slightly.

“Oil is clawing its way higher mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” said Edward Moya, senior market analyst at broker OANDA.

“WTI crude volatility will remain high and traders should not be surprised if this rally eventually gets faded.”

The U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from restrictions on commerce that scientists say are needed to slow the coronavirus pandemic.

While a $2 trillion coronavirus economic stimulus package remained stalled in the U.S. Senate on Monday as lawmakers haggled over its provisions, U.S. Treasury Secretary Steven Mnuchin voiced confidence that a deal would be reached soon.

The expected stimulus pushed the U.S. dollar lower as it will increase the cash supply. The dollar index, which measures the greenback against six major currencies, fell 0.5% on Tuesday.

A weaker greenback boosts dollar-denominated oil prices since buyers paying in other currencies will pay less for their crude.

Still, the overall crude demand outlook remains low as long as travel restrictions are in place and governments curtail commercial activities to prevent the coronavirus spread.

Prices and profit margins for motor and aviation fuels globally are under severe pressure from a plunge in demand as countries enforce lockdowns and airlines ground planes, forcing more refineries to reduce output and lower their crude oil demand.

Concerns over oil demand were also stoked by a doubling of new coronavirus cases in China, the world’s biggest oil importer, caused by a jump in infected travelers returning home from overseas. That is raising the risk of transmissions in Chinese cities and provinces that had seen no new infections in recent days.

“While the anticipated lengthy absence of air traffic presents a significant obstacle in its own right, … the expected ramp in supply, which suggests storage will fill very quickly, and then prices will plummet as physical demand continues to evaporate,” said Stephen Innes, chief global markets strategist at AxiCorp.

Oil falls for fifth day on demand concerns as coronavirus spreads

CNBC

Reuters
KEY POINTS
  • Brent crude was down 63 cents, or 1.2%, at $52.80 a barrel at 0414 GMT. The contract earlier fell to as low as $52.57, the lowest since Jan. 2, 2019.
  • West Texas Intermediate (WTI) futures fell by 65 cents, or 1.3%, to $48.08 a barrel. It earlier fell to as low as $47.84, the lowest since Jan. 4, 2019.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices fell for a fifth day on Thursday to their lowest since January 2019 as a growing number of new coronavirus cases outside of China fuelled fears of a pandemic which could slow the global economy and lower crude demand.

Brent crude was down 63 cents, or 1.2%, at $52.80 a barrel at 0414 GMT. The contract earlier fell to as low as $52.57, the lowest since Jan. 2, 2019.

West Texas Intermediate (WTI) futures fell by 65 cents, or 1.3%, to $48.08 a barrel. It earlier fell to as low as $47.84, the lowest since Jan. 4, 2019.

In the five trading sessions through Thursday, Brent has dropped 11%, while WTI has declined 10.6%, their biggest five-day percentage losses since August 2019.

On Wednesday, for the first time ever, the number of new coronavirus infections outside China, the source of the outbreak, exceeded the number of new Chinese cases.

The spread to large economies including South Korea, Japan and Italy has caused concerns that fuel demand growth will be limited. On Wednesday, consultants Facts Global Energy forecast oil demand growth will only 60,000 barrels per day in 2020, or “practically zero”, because of the widening outbreak.

U.S. President Donald Trump assured Americans on Wednesday evening that the risk from coronavirus remained “very low”. However, Asian share markets fell on Thursday morning, as investors fear the coronavirus spread will disrupt the global economy as quarantines and other measures taken to halt its advance slow trade and industry.

“Speculations that coronavirus may spread in the United States prompted a series of fresh selling,” said Kazuhiko Saito, chief analyst at Fujitomi Co.

If an outbreak “continues to worsen in the United States, oil prices will likely decline further, especially with U.S. gasoline prices already plunging,” Saito said.

The United States is the world’s largest oil producer and consumer.

Gasoline stockpiles dropped by 2.7 million barrels in the week to Feb. 21 to 256.4 million, the Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the Energy Information Administration said, which was less than the 2-million-barrel rise analysts had expected.

The crude market was also watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a group known as OPEC+.

OPEC+ plans to meet in Vienna over March 5-6.

Oil rises on short-covering despite growing fears over coronavirus

CNBC

Reuters
KEY POINTS
  • Brent crude rose 42 cents, or 0.8%, to $55.37 a barrel by 0154 GMT.
  • U.S. West Texas Intermediate crude gained 43 cents, or 0.9%, to $50.33 a barrel.
  • Still, both benchmarks are down nearly 7% since last Thursday’s close.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Crude prices edged up on Wednesday as investors covered short positions after three sessions of losses, even as fears deepened that the rapid spread of the coronavirus will lead to a global pandemic.

Brent crude rose 42 cents, or 0.8%, to $55.37 a barrel by 0154 GMT, while U.S. West Texas Intermediate crude gained 43 cents, or 0.9%, to $50.33 a barrel. Still, both benchmarks are down nearly 7% since last Thursday’s close.

Fears of a pandemic escalated after the coronavirus spread to more countries, while Iran’s virus death toll rose to 16, the highest outside China, and infections worsened in South Korea and Italy.

In the United States, the Centers for Disease Control and Prevention said Americans should prepare for possible community spread of the virus.

“Investors unwound short positions after WTI dipped below a key support level of $50, as they have done a few times earlier this month,” said Hideshi Matsunaga, analyst at Sunward Trading.

“The reduction in Libya’s output and expectations for additional production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ are also lending support,” he said.

Oil output in Libya has fallen sharply since Jan. 18 because of a blockade of ports and oil fields by groups loyal to eastern-based commander Khalifa Haftar.

OPEC and its allies including Russia, a group known as OPEC+, are due to meet in Vienna over March 5-6.

Saudi Arabia’s energy minister said on Tuesday he was confident that OPEC and its partners would respond responsibly to the spread of the coronavirus.

Still, lingering worries that the rapidly spreading coronavirus will dent the global economy and oil demand are weighing on investor sentiment.

The International Energy Agency’s (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.

U.S. crude inventories are expected to rise for a fifth week running. The American Petroleum Institute (API) said late Tuesday that crude stockpiles rose 1.3 million barrels last week. Government data due at 10:30 a.m. EST (1530 GMT) on Wednesday was expected to show a 2 million-barrel rise, according to a Reuters poll.

Meanwhile, the United States is preparing to impose more sanctions on Venezuela’s oil sector, President Donald Trump said on Tuesday, in an attempt to choke financing to President Nicolas Maduro’s government.

Oil steadies on bargain-hunting; virus fears cap gains

CNBC

Reuters
KEY POINTS
  • Brent crude rose 19 cents, or 0.3%, to $56.49 a barrel by 0436 GMT, after slipping 3.8% on Monday, the largest single-day price fall since Feb. 3.
  • U.S. crude futures gained 17 cents, or 0.3%, to $51.60, recovering from a 3.7% drop in the previous session.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil steadied on Tuesday as investors sought bargains after crude benchmarks slumped almost 4% in the previous session, although concerns about the coronavirus spreading out of China denting major economies and curbing fuel demand capped gains.

Brent crude rose 19 cents, or 0.3%, to $56.49 a barrel by 0436 GMT, after slipping 3.8% on Monday, the largest single-day price fall since Feb. 3.

U.S. crude futures gained 17 cents, or 0.3%, to $51.60, recovering from a 3.7% drop in the previous session.

“Because we’ve seen a very significant fall in case of West Texas, from above $60 to touch below $50 (over the past six weeks), I think oil has largely reflected a lot of risk, unlike other markets,” Michael McCarthy, chief market strategist at CMC Markets, told Reuters over the phone.

Crude markets are also close to an important technical support level between $49.50 and $50 for WTI and between $54.50 and $55 for Brent, McCarthy said.

“For this week, key factors are coronavirus, inventory data and the technical picture,” he said.

Demand concerns savaged prices for oil and a whole swathe of commodities on Monday, while both U.S. and European equities suffered their steepest losses since mid-2016.

Asian share markets were trying to stabilize on Tuesday after a wave of early selling petered out and Wall Street futures managed a solid bounce.

In the United States, crude oil inventories were seen building for a fifth straight week, while refined products likely fell, a preliminary Reuters poll on the expectations for the week ended on Feb. 21 showed on Monday.

Countries around the world are stepping up efforts to prevent a pandemic of the flu-like SARS-CoV-2 virus originating from China late last year that has now infected more than 80,000 people, 10 times more than the SARS coronavirus of 2002/2003.

“Fears that the rapidly-spreading coronavirus outside of China could lead to a bigger-than-anticipated impact on global economy and oil demand will likely keep weighing on market sentiment,” Satoru Yoshida, a commodity analyst with Rakuten Securities said.

Saudi Aramco expects the coronavirus impact on oil demand to be short-lived, however, and for consumption to rise in the second half of the year, Chief Executive Amin Nasser told Reuters on Monday.

Oil prices skid on demand concerns as virus spreads globally

CNBC

Reuters
KEY POINTS
  • Brent crude fell by $1.69 or 2.9% to $56.81 a barrel by 0158 GMT.
  • U.S. crude futures fell by $1.40 or 2.6% to $51.98.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices tumbled nearly 3% towards a one-week low on Monday as the rapid spread of the coronavirus in several countries outside China left investors fretting about a hit to demand.

Global shares also extended losses as concerns about the impact of the new virus grew, with the number of infections jumping in South Korea, Italy and Iran.

Brent crude fell by $1.69 or 2.9% to $56.81 a barrel by 0158 GMT. U.S. crude futures fell by $1.40 or 2.6% to $51.98.

“It’s pretty clear in the middle of last week that the consensus overall was that it would be a temporary economic impact and that would be at least offset by the actions of central banks,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“But as we’ve seen European and U.S. markets react on Friday night and then further news over the weekend about the global spread of the virus, investors now are questioning the assumption about economic growth and that of course is weighing on oil markets.”

South Korea’s government put the country on high alert after the number of infections surged to over 700 with seven deaths, while in Italy, officials said a third person infected with the flu-like virus had died, as the number of cases jumped to above 150 from just three before Friday.

Iran said it had confirmed 43 cases and eight deaths, with most of the infections in the Shi’ite Muslim holy city of Qom. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the Islamic Republic.

“We should not underestimate the economic disruption as a super spreader could trigger a massive drop in business activity around the globe of proportions the world has never dealt with before,” said Stephen Innes, chief market strategist at AxiCorp in a note on Monday.

Oil prices received some support after local health commissions in China said on Monday that four Chinese provinces — Yunnan, Guangdong, Shanxi and Guizhou — have lowered their coronavirus emergency response measures.

Chinese President Xi Jinping said on Sunday the world’s largest energy consumer will adjust policy to help cushion the blow to the economy from the coronavirus outbreak.

In the United States, the oil rig count, an indicator of future production, rose for a third straight week. Drillers added one oil rig last week, bringing the total count to 679, the highest since the week of Dec. 20, energy services firm Baker Hughes Co said.