Oil prices fall as market weighs coronavirus demand impact

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Reuters
KEY POINTS
  • Brent crude was at $57.07 a barrel, down 60 cents, or 1%, by 0348 GMT.
  • U.S. West Texas Intermediate crude fell 38 cents, or 0.7%, to $51.67 a barrel.
GP: Oil rig 180102
Oil pumpjacks in silhouette at sunset.

Oil prices fell on Tuesday, tracking losses in financial markets on lingering concerns over the economic impact of the coronavirus outbreak in China and its effect on oil demand.

Brent crude was at $57.07 a barrel, down 60 cents, or 1%, by 0348 GMT, while U.S. West Texas Intermediate crude fell 38 cents, or 0.7%, to $51.67 a barrel.

“Oil prices remain heavy as energy traders may have been overly optimistic as to the crude demand impact of the coronavirus, and in fading optimism that OPEC + will come through with deeper production cuts in March,” said Edward Moya, senior market analyst at OANDA.

“Optimism that China would see a return to normalcy in travel and trade next quarter was probably wrong… The rest of world is exercising caution on virus spreading fears and that will do no favors for crude’s demand outlook.”

U.S. stock futures slipped from record levels on Tuesday after Apple Inc, the most valuable company in the United States, said it will not meet its revenue guidance for the March quarter as the coronavirus outbreak slowed production and weakened demand in China.

The number of new coronavirus infections in mainland China fell below 2,000 on Tuesday for the first time since January, Chinese health officials said, although global experts warn it is too early to say the outbreak is being contained.

The International Energy Agency (IEA) said last week the virus was set to cause oil demand to fall by 435,000 barrels per day (bpd) year-on-year in the first quarter, in what would be the first quarterly drop since the financial crisis in 2009.

Still, with some Chinese independent refineries snapping up crude supplies after being absent from the market for weeks, traders held out hopes that China’s demand could recover in coming months.

Investors are also anticipating that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will approve a proposal to deepen production cuts to tighten global supplies and support prices.

The group, known as OPEC+, has an agreement to cut oil output by 1.7 million bpd until the end of March.

Oil output from 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.

Libya’s national oil corporation, NOC, said on Monday that oil production was at 135,745 barrels per day as of Monday, compared with 1.2 million bpd before the stoppage.

Oil prices slip ahead of economic data that could indicate impact of coronavirus outbreak

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Reuters
KEY POINTS
  • Brent crude was at $56.99 a barrel, down 33 cents by 0121 GMT after rising 5.2% last week, the biggest weekly gain since September 2019.
  • U.S. West Texas Intermediate crude fell 13 cents to $51.92 a barrel, after a 3.4% gain last week.
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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 edged lower on Monday as investors brace for economic data in Asia due this week that should give a reading on how China’s coronavirus epidemic has affected oil demand.

Brent crude was at $56.99 a barrel, down 33 cents by 0121 GMT after rising 5.2% last week, the biggest weekly gain since September 2019.

U.S. West Texas Intermediate crude fell 13 cents to $51.92 a barrel, after a 3.4% gain last week.

The weekly gains, the first since early January, were spurred by hopes that stimulus measures taken by China to support its economy amid the coronavirus outbreak could lead to a recovery in oil demand in the world’s largest importing country.

But the International Energy Agency (IEA) said the virus is already set to cause oil demand to fall by 435,000 barrels per day (bpd) in the first quarter from the same period a year ago, in what would be the first quarterly drop since the depths of the financial crisis in 2009.

Analysts at Capital Economics said over the weekend that it is too soon to start assessing the longer-term economic fallout from the epidemic.

“Attention will be paid (this week) to the range of flash manufacturing PMIs (purchasing managers’ indices) for February, particularly those in Asia, as these should provide an early indication of how significantly the virus is affecting global manufacturing supply chains,” Capital Economics said.

“We expect the data to be weak, but if they are better-than-expected then industrial commodity prices could see further gains.”

Investors are also anticipating that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will approve a proposal to deepen production cuts in a move to tighten global supplies and support oil prices.

The group, also known as OPEC+, has an agreement to cut oil output by 2.1 million bpd until the end of March.

A technical committee has recommended the group reduces production by another 600,000 bpd because of the impact from the coronavirus on China’s oil demand.

Russia, facing a growing oil glut, could support further output cuts.

Oil prices climb as OPEC and its allies weigh output cuts to cushion coronavirus impact

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Reuters
KEY POINTS
  • Brent crude oil futures were up 44 cents, or 0.8%, to $54.40 a barrel by 0127 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were up 42 cents or 0.9% to $50.03 a barrel.
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The logo of the Organization of the Petroleum Exporting Countries (OPEC) at the headquarters.
Omar Marques | SOPA Images | LightRocket | Getty Images

Oil prices rose on Wednesday, reversing out of a 1% slump in the previous session, boosted by producers weighing further output cuts to counter a potential squeeze on global oil demand resulting from China’s fast-spreading coronavirus.

Brent crude oil futures were up 44 cents, or 0.8%, to $54.40 a barrel by 0127 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 42 cents or 0.9% to $50.03 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, a group known as OPEC+, weighed the impact on global oil demand, and economic growth, of the coronavirus outbreak at a meeting on Tuesday, hearing from China’s envoy to the United Nations in Vienna.

Producers are weighing further output cuts and moving a planned policy meeting to February rather than March.

“At these prices, commodity producers will soon begin to cut back on production and investment,” Moody’s Analytics said in a note on Wednesday.

“Given the economic damage caused (by the virus) prospects are poor that prices will recover soon.”

China, the world’s biggest crude oil importer, has been the main driver of global energy demand growth in recent years.

Fears of a virus-related slump in global demand have flipped the oil market into contango this week – a structure in which longer-dated oil futures trade at a premium that encourages traders to keep crude in storage for more profitable resale in the future, potentially indicating months of surplus.

Oil drops after US inventory build, new output record

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Reuters
KEY POINTS
  • Brent crude futures were down 18 cents, or 0.3%, at $63.88 a barrel by 0517 GMT, having dropped 0.3% on Wednesday.
  • U.S. West Texas Intermediate crude fell 24 cents, or 0.4%, to $57.87, after falling 0.5% in the previous session.
GP: US Oil workers Oil Boom in Texas's Permian Basin 1
Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
Benjamin Lowy | Getty Images

Oil prices fell on Thursday, extending losses from the previous session after official data showed U.S. crude and gasoline stocks rose against expectations as production hit a record.

Brent crude futures were down 18 cents, or 0.3%, at $63.88 a barrel by 0517 GMT, having dropped 0.3% on Wednesday.

U.S. West Texas Intermediate crude fell 24 cents, or 0.4%, to $57.87, after falling 0.5% in the previous session.

Crude stockpiles in the United States swelled 1.6 million barrels last week as production hit a record high of 12.9 million barrels per day (bpd) and refinery runs slowed, the Energy Information Administration said. Analysts in a Reuters poll had forecast a drop of 418,000 barrels.

More bearish was a 5.1 million-barrel rise in gasoline stocks, compared with forecasts for a 1.2 million-barrel gain.

“Stubbornly high U.S. crude inventories have seen oil prices ease in Asia today,” said Jeffrey Halley, senior market analyst at OANDA. But “dips … are likely to be limited for now, as the U.S. holiday mutes activity,” he added.

Oil prices had risen this week on expectations that China and the United States, the world’s two biggest crude users, would soon sign a preliminary agreement, putting an end to their 16-month trade dispute.

Forces based in eastern Libya said on Wednesday they had driven rival factions from the 70,000-bpd El Feel oilfield after attacking the area with air strikes, leading to production being halted and raising some worries about supply.

In the United States, energy services company Baker Hughes reported that U.S. oil drillers reduced the number of drilling rigs for a record 12 months in a row.

Drillers cut three oil rigs in the week to Nov. 27, bringing the count down to 668, lowest since April 2017, Baker Hughes said in its report released a day early due to the U.S. Thanksgiving holiday.

Oil falls but remains set for weekly gain on US-China diplomacy

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Reuters
Reusable: Idled oil drilling rigs North Dakota
Stacked rigs are seen along with other idled oil drilling equipment in Dickinson, North Dakota, June 26, 2015.
Andrew Cullen | Reuters

Oil prices fell on Friday as U.S.-China trade tensions continued to weigh on sentiment despite recent diplomatic progress.

Brent crude was down 94 cents, or 1.6%, at $60.01 a barrel. U.S. West Texas Intermediate (WTI) crude was down $1.08, or 1.9%, at $55.22.

Brent is still set to register its fourth consecutive weekly gain while U.S. crude is on track for a second weekly rise.

Beijing and Washington on Thursday agreed to hold high-level talks in early October. The news cheered investors hoping for an end to a trade war that has brought tit-for-tat tariffs between the world’s two biggest economies, chipping away at economic growth.

The prolonged dispute has had a dampening effect on oil prices, though they have risen over the year thanks partly to production cuts led by the Organization of the Petroleum Exporting Countries and Russia to drain inventories.

However, analysts warn that market fundamentals remain bearish and depend heavily on a resolution to the U.S.-China trade saga.

“If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices,” UBS oil analyst Giovanni Staunovo said in a note analysing oil market trends for 2020.

“On the other hand, unexpected supply disruptions in the Middle East or a surprise production cut by OPEC and its allies may push oil prices higher.”

U.S. crude and product inventories fell last week, with crude drawing down for a third consecutive week despite a jump in imports, the Energy Information Administration (EIA) said.

Crude stocks dropped 4.8 million barrels, nearly double analyst expectations, to 423 million barrels, their lowest level since October last year.

Oil prices on Thursday soared more than 2% after the EIA report, though they gradually trimmed gains on investor doubts over the chances that the trade talks will yield results.

“There is still no getting away from lingering demand-side concerns,” said Stephen Brennock, of oil broker PVM.

“Consequently, any looming upside potential will be built on wobbly foundations so long as the U.S. and China continue to do battle on the trade front.”

In another sign of a possible global economic slowdown, data released on Friday showed German industrial output fell unexpectedly in July, putting Europe’s biggest economy at risk of falling into recession in the third quarter.

European markets slipped from one-month highs and the upbeat mood brought on by potential U.S.-China trade talks seemed to fade as markets awaited U.S. jobs data later on Friday.