Oil prices stabilize, set for weekly gain on hopes for supply cut

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Reuters
KEY POINTS
  • Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.
  • U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.
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 were steady on Friday, but set for their first weekly gain in six weeks on the assumption that major producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic.

Brent crude futures were 1 cent higher at $56.35 a barrel by 0439 GMT, after gaining 1% the previous session. Brent is 3.4% higher for the week, the first increase since the week of Jan. 10.

U.S. West Texas Intermediate (WTI) futures were 4 cents higher at $51.46 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.

“Oil prices appear to have stabilised this week on optimism that OPEC+ will once again do whatever it takes to tighten output and on hope that the coronavirus peak is nearing,” said Edward Moya, senior market analyst at OANDA in New York.

Crude prices have plunged about 20% from their 2020 peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country’s quarantine to fight the coronavirus outbreak has stymied economic activity.

In response to the demand slump, the Organization of the Petroleum Exporting Countries (OPEC) and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day.

“Sentiment remains cautious across Asia-Pacific region, due to virus uncertainty,” said Margaret Yang, market analyst at CMC Markets, adding that the extent of the virus-led global oil demand destruction remained unclear.

But other analysts caution the demand impact is only limited to China so far.

“The spread of the coronavirus remains extremely fluid and while market sentiment is held at the mercy of each passing coronavirus headline, our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand,” said Helima Croft, head of commodity strategy at Citadel Magnus.

The market is signalling that some near-term demand for oil remains. The spread between the first-month April Brent future and the May contract has narrowed to a discount of only 1 cent a barrel on Friday from a discount of 33 cents a week ago.

The narrowing of this contango — a market situation that occurs when prompt prices are less than later-dated contracts — suggest that demand for oil is improving for Brent-related crude.

Still, some concern remains about the impact the Chinese demand slowdown may have.

The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China.

Oil climbs after Russia backs possible output cuts to counter coronavirus impact on demand

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Reuters
KEY POINTS
  • Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday.
  • U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.
  • A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.
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 Friday after Russia said it backs a recommendation for the OPEC and its producer allies to deepen output cuts amid contracting demand for crude as China battles the coronavirus epidemic that has hit global markets.

Brent crude futures rose 32 cents, or 0.6%, to $55.25 a barrel by 0104, after falling 0.6% on Thursday. U.S. West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.5%, at $51.21 a barrel, having gained 0.4% the previous session.

A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.

“We support this idea,” said Sergei Lavrov, Russia’s Foreign Minister, when asked about the proposal at a news conference in Mexico City later in the day.

Oil prices have fallen by more than a fifth since the outbreak of the virus in the city of Wuhan in China.

Chinese President Xi Jinping declared a “people’s war” on the epidemic as China’s Hubei province, where Wuhan is located, reported 69 new deaths, taking the total in the country to more than 600.

“The impact of the coronavirus on the oil market remains largely a Chinese demand story with weakening jet fuel demand and economic run cuts, but demand destruction outside of China has been minimal, for now,” RBC Capital Markets analysts said in a note.

Oil rises, extending gains amid optimism over China coronavirus

CNBC

Reuters
KEY POINTS
  • Brent futures rose by 98 cents, or 1.8%, to $56.26 a barrel by 0311 GMT, having risen 2.4% in the last session.
  • U.S. West Texas Intermediate (WTI) futures gained $1.08, or 2.1%, to $51.83 a barrel after rising 2.3% on Wednesday.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Oil futures rose for a second day on Thursday amid investor optimism over unconfirmed reports of possible advances in combating the coronavirus outbreak in China as a sign fuel demand may rebound in the world’s biggest oil importer.

Brent futures rose by 98 cents, or 1.8%, to $56.26 a barrel by 0311 GMT, having risen 2.4% in the last session. U.S. West Texas Intermediate (WTI) futures gained $1.08, or 2.1%, to $51.83 a barrel after rising 2.3% on Wednesday.

A committee that advises the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, a group known as OPEC+, is set to meet for a fourth day on Thursday. They are discussing whether to reduce oil production further to support prices after a multi-day slump over concerns about economic growth and energy demand caused by the outbreak.

“Oil markets are rebounding from the 5-day slide as investors turn optimistic that OPEC+ officials will deliver an appropriate response to … the spread of the coronavirus,” said Stephen Innes, chief market strategist at AxiCorp.

The Joint Technical Committee for OPEC+ has been meeting this week to consider increasing output cuts by an additional 500,000 barrels per day or to extend current cuts beyond March. OPEC+ ministers are due to meet on March 5 and 6.

Oil prices have slumped more than 20% since reaching their highest this year on Jan. 8 on demand concerns caused by the virus outbreak and oversupply indications.

A technical market indicator known as the relative strength index, which measures buying and selling momentum, suggests that prices have fallen too far, too fast and investors may be buying futures in response.

In the last two days, commodities, equities and other markets have been buoyed by unconfirmed reports of a possible advance in producing treatment drugs for the coronavirus that has shut down transport and limited industrial activity in China.

However, the World Health Organization has played down the reports of “breakthrough” drugs being discovered.

A further 73 people on the Chinese mainland died on Wednesday from the virus, the highest daily increase since the outbreak started, and another 3,694 new cases were reported, raising the total to 28,018.

Commodity supply chains in China have been disrupted to the extent that short-term sales of crude oil, along with liquefied natural gas, fell to nearly zero this week.

Buyers in China, the world’s biggest importer of most commodities, are considering taking legal action to avoid honoring purchase agreements.

In the U.S., gasoline stockpiles dropped last week, counter to analysts’ expectations for a gain, and diesel inventories fell more than expected, the Energy Information Administration reported. However, crude stockpiles rose by a more-than-expected 3.4 million barrels last week to 435 million barrels.

Oil rebounds, but markets ‘twitchy’ over China virus impact on demand

CNBC

Reuters
KEY POINTS
  • Brent crude futures were up 24 cents, or 0.4%, at $62.28 a barrel by 0456 GMT after falling 1.9% the previous session. For the week, Brent is down 4%.
  • U.S. West Texas Intermediate futures were 24 cents, or 0.4%, higher at $55.83 a barrel. The contract fell 2% on Thursday and is 5% lower for the week.
Reusable: Oil tanker France sunset 151016
Jean-Paul Pelissier | Reuters

Oil prices edged up on Friday, helped by a decline in U.S. crude stockpiles, but were on track for to fall up to 5% for the week on worries that the China coronavirus that has killed 25 so far may spread, curbing travel, fuel demand and economic prospects.

Brent crude futures were up 24 cents, or 0.4%, at $62.28 a barrel by 0456 GMT after falling 1.9% the previous session. For the week, Brent is down 4%.

U.S. West Texas Intermediate futures were 24 cents, or 0.4%, higher at $55.83 a barrel. The contract fell 2% on Thursday and is 5% lower for the week.

″(The) virulent sell-off on the … flu scare was mollified by a timelydecline in U.S. crude inventories,” said Stephen Innes, market strategist at AxiTrader.

“Oil prices could remain on a slippery slope as traders remain incredibly twitchy about the effects the coronavirus outbreak could have on Chinese GDP and air travel more broadly,” said Innes.

The virus has infected more than 800 so far in China, with 25 dead as of Thursday, according to China’s National Health Commission. The World Health Organisation has declared the situation an emergency, but stopped short of declaring the epidemic of international concern.

Most of the cases are in the central Chinese city of Wuhan, where the virus is believed to have originated late last year, though cases have now been found in at least seven other countries.

Offering some support for prices was news that U.S. crude oil and distillate inventories fell last week, the Energy Information Administration said on Thursday.

Though they failed to match analysts’ expectations in a Reuters poll of a 1 million barrel drop, crude inventories did decline by 405,000 barrels in the week to Jan. 17, government data showed.

Elsewhere, refined fuel exports from India jumped in December as its slowing economy crimped domestic demand.

India’s refined fuel exports rose 24.2% in December year-on-year to 6.46 million tonnes, the fastest growth since October 2016, official data released on Thursday showed.