Oil prices jump as sharp falls draw investors, bargain buyers

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Reuters
KEY POINTS
  • Brent crude was up by 1.8%, or 55 cents, to $30.60 a barrel by 0410 GMT, after hitting a high of $31.25.
  • U.S. West Texas Intermediate (WTI) crude rose 3.7%, or $1.06, to $29.76, having come off a high of $30.21.
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 rose more than $1 on Tuesday as bargain hunters emerged after recent sharp falls due to the coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession still dragged on the market.

Brent crude was up by 1.8%, or 55 cents, to $30.60 a barrel by 0410 GMT, after hitting a high of $31.25.

U.S. West Texas Intermediate (WTI) crude rose 3.7%, or $1.06, to $29.76, having come off a high of $30.21.

“Presumably, the market is getting supported by physical bargain hunters and short covering,” said Stephen Innes, chief markets strategist at AxiCorp.

The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR), and other countries and companies are planning similar measures to fill storage tanks.

“But those storage facilities are rapidly filling. If storage does fill, quashing that demand, oil prices are sure to collapse further, and the global markets will then have to hope that the dispute between Saudi Arabia and Russia is resolved before we reach that point of no return,” Innes said.

Amid heavy demand loss from the global spread of the virus that causes COVID-19, Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market.

Saudi Aramco has said it would likely carry over its planned higher oil output for April into May, and that it was “very comfortable” with an oil price of $30 a barrel.

“A deeply imbalanced supply and demand outlook has not changed as Saudi and Russia have ramped up production in a time when global energy demand is badly hurt by border controls and travel bans,” said Margaret Yang of CMC Markets.

Countries including the United States and Canada, and nations in Europe and Asia, are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.

Gasoline refining margins in the United States, the world’s largest consumer of the motor fuel, plunged around 95% on Monday, briefly turning negative, as people stayed off the roads.

U.S. President Donald Trump on Monday said economic disruptions from the spread of the coronavirus and measures taken against it could lead to a recession.

In Asia, margins for transportation fuels also plunged to multi-year or multi-month lows after more countries imposed travel restrictions and curbed domestic movements as part of measures to slow down spread of the coronavirus.

Oil falls a third day, Brent crude set for worst week since 1991

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Reuters
KEY POINTS
  • Brent crude was down 67 cents, or 2%, at $32.55 a barrel by 0126 GMT after falling more than 7% on Thursday. For the week, Brent is set to fall 28%, the biggest weekly decline since the week of Jan. 18, 1991, when it fell 29% at the outbreak of the first Gulf War.
  • U.S. West Texas Intermediate (WTI) crude was down 66 cents, or 2.1%, at $30.84 after falling more than $1 earlier.
GP: Oil field 200310 Asia
A pumpjack near the Yamashinskoye rural settlement in the Almetyevsk District.
Yegor Aleyev | TASS | Getty Images

Oil prices fell on Friday for a third day, with Brent crude set for its biggest weekly drop since 1991 and U.S. crude heading for the worst week since 2008 as panic about plunging demand from the coronavirus outbreak grips the market.

Brent crude was down 67 cents, or 2%, at $32.55 a barrel by 0126 GMT after falling more than 7% on Thursday. For the week, Brent is set to fall 28%, the biggest weekly decline since the week of Jan. 18, 1991, when it fell 29% at the outbreak of the first Gulf War.

U.S. West Texas Intermediate (WTI) crude was down 66 cents, or 2.1%, at $30.84 after falling more than $1 earlier. The contract fell 4.5% in the previous session. WTI is set to drop 25% this week, the most since the week of Dec. 19, 2008, when it fell 27% at the height of the Global Financial Crisis.

A flood of low-priced oil into the market from Saudi Arabia and the United Arab Emirates is intensifying the pressure on prices after the collapse of a price supporting agreement with Russia last week.

“With the coronavirus triggering the first global oil demand drop in years, the surge of Saudi Arabian and Russian oil production could lead to a supply overhang of 4 million barrels per day,” Eurasia Group said.

Four million barrels is about 4% of daily global consumption before the coronavirus outbreak that started in China.

Oil prices were also impacted by record declines in equity markets with Japan’s Nikkei 225 falling by 10% on Friday after U.S. markets fell by the most since Black Monday in 1987 on Thursday.

U.S. President Donald Trump announced a ban on travel to the United States from Europe that sent the markets swooning as everything from sporting events to weddings were cancelled across many parts of the world with the coronavirus spreading to more countries.

Oil extends gains as hopes of stimulus, OPEC cuts offset virus

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Reuters
KEY POINTS
  • Brent crude rose $1.26 per barrel, or 2.4%, to $53.16 per barrel by 0410 GMT.
  • U.S. West Texas Intermediate (WTI) rose $1.24, or 2.7%, to $47.99 a barrel.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Oil prices rose for a second day on Tuesday on expectations that central banks are likely to enact financial stimulus to offset the impacts of the coronavirus outbreak and growing optimism that OPEC will order deeper output cuts this week.

Brent crude rose $1.26 per barrel, or 2.4%, to $53.16 per barrel by 0410 GMT. U.S. West Texas Intermediate (WTI) rose $1.24, or 2.7%, to $47.99 a barrel.

Brent and WTI have rebounded somewhat over the past two days from a more than 20% drop from their 2020 peak in January that was caused by signs the coronavirus spread has dented fuel demand.

Since Friday, WTI has gained 7.2% while the front-month Brent contract has climbed 7%, the biggest two-day percentage gains for both contracts since prices snapped back after the missile attacks on Saudi Arabian oil facilities in September 2019.

“Oil prices got their groove back after the world’s largest economies signalled they will be united in fighting off the economic impact of the coronavirus and on the Russian capitulation in agreeing to deliver deeper production cuts at this week’s meeting,” said Edward Moya, senior market analyst at OANDA.

G7 finance ministers will also discuss this week how to best to cushion the impact of the outbreak on economic growth, French Finance Minister Le Maire said on Monday. That is occurring as other major central banks have promised monetary and fiscal stimulus.

The coronavirus, which originated in China, has spread to more than 60 countries and has killed over 3,000 people globally.

“The coronavirus is still spreading globally and until markets can possibly calculate a return of normal travel and trade, oil will struggle,” Moya said.

With lingering worries over oil demand amid the virus outbreak, several key members of the Organization of the Petroleum Exporting Countries (OPEC) are mulling a bigger oil output cut of possibly 1 million barrels per day (bpd). The previous proposal was for an additional reduction of 600,000 bpd.

OPEC and its allies, a group known as OPEC+, are expected to announce deeper output cuts at their meeting on March 5-6 in Vienna. The group had agreed to cut output by 1.7 million bpd in a deal that runs to the end of March.

Singapore-based analyst Margaret Yang at CMC Markets said the gradual resumption of business activities in China has also supported oil prices.

Brent has found strong technical support at $51 a barrel while immediate resistance levels are at $54.70 and $57.20 a barrel, she added.

Oil stockpiles in the United States, the world’s biggest crude producer and consumer, are expected to rise for a sixth week by 3.3 million barrels, while refined product inventories are forecast to fall, according to Reuters poll.

Oil rises for third day as coronavirus impact may spur output cuts

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Reuters
KEY POINTS
  • Brent crude rose 17 cents, or 0.3%, to $55.96 per barrel at 0217 GMT.
  • U.S. West Texas Intermediate (WTI) rose 29 cents, or 0.6%, to $51.46 a barrel.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Oil prices rose for a third day on expectations that major producers are likely to enact deeper output cuts to offset the slump in demand caused by the coronavirus outbreak in China, the world’s second-largest crude consumer.

Brent crude rose 17 cents, or 0.3%, to $55.96 per barrel at 0217 GMT. U.S. West Texas Intermediate (WTI) rose 29 cents, or 0.6%, to $51.46 a barrel.

The Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, recommended last week an additional output cut of 600,000 barrels per day (bpd) to its current 1.7 million bpd reduction to offset the disease-related demand losses.

OPEC yesterday lowered its 2020 forecast for demand for the group’s crude by 200,000 bpd, prompting expectations that OPEC+ will enact the cuts when the group next meets, possibly as early as this month.

Russia’s government has not made clear that it will endorse the deeper cuts but a majority of Russian oil companies want the cuts extend through the second quarter at least, a senior Lukoil official said on Wednesday.

“Oil is up as OPEC awaits an official response from Russia regarding proposed production cuts,” Stephen Innes, chief market strategist at AxiCorp, said in a note on Thursday.

Oil may also be rising as traders who opened so-called short positions, or bets that prices will fall, are buying futures contracts to lock in profits from the recent plunge in oil prices, said Innes.

Brent and WTI have fallen more than 20% from their 2020-peak in January. The contracts rose over 3% on Wednesday as a slowdown in new Chinese coronavirus cases boosted expectations of a demand recovery.

Those expectations for a price recovery “should send more shorts running for cover,” Innes said.

Still, data on the number of new confirmed cases in Hubei province, the epicenter of the outbreak, indicates that the outbreak and its impact on oil demand will continue. New cases jumped by 14,840 on Feb. 12 to 48,206, and deaths climbed by a daily record of 242 to 1,310, the province said on Thursday, reflecting changes to the diagnostic methodology.

Travel restrictions to and from China and quarantines within the country have curbed oil consumption.

The expectations for lower future fuel demand because of the virus has shifted the market structure for both WTI and Brent into a contango, when prompt prices are less than later prices.

The price of the front-month April Brent contract is at a current discount of 50 cents a barrel to the September future.

Adding to the sense of a well-supplied market, U.S. crude inventories in the week to Feb. 7 increased by a more-than-expected 7.5 million barrels to 442.5 million barrels, the Energy Information Administration said on Wednesday. That is the highest since the week of Dec. 13.

Oil extends decline on concerns about virus’ impact on China demand

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Reuters
KEY POINTS
  • Brent crude was at $55.83 a barrel by 0047 GMT, down 79 cents, or 1.4%, after losing nearly 12% in January, the steepest monthly decline since November 2018.
  • U.S. West Texas Intermediate (WTI) crude fell 50 cents to $51.06 a barrel, after earlier hitting a session low of $50.42. The front-month WTI price fell 15.6% in January, the biggest monthly drop since May.
Reusable: Crude oil refinery Philadelphia Energy Solutions 141024
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Oil prices extended declines on Monday, dragged down by worries about lower demand in the world’s largest oil importer China following the coronavirus breakout.

Brent and U.S. West Texas Intermediate (WTI) crude fell for a fourth week in a row last week after airlines cancelled flights to China. Supply chains across the world’s second largest economy have also been disrupted.

Brent crude was at $55.83 a barrel by 0047 GMT, down 79 cents, or 1.4%, after losing nearly 12% in January, the steepest monthly decline since November 2018.

U.S. West Texas Intermediate (WTI) crude fell 50 cents to $51.06 a barrel, after earlier hitting a session low of $50.42. The front-month WTI price fell 15.6% in January, the biggest monthly drop since May.

China’s factory activity stalled in January as export orders fell while analysts expect a big plunge in February’s data as the virus outbreak hit demand in the country, even as the central bank planned to inject more liquidity to shore up its economy.

“The shuttering of airports suggests that there would be at least some demand delay, if not deferred or destroyed,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies could bring forward their March meeting to February to discuss the impact on oil demand from the virus flare-up.

OPEC’s oil output plunged in January to the lowest since 2009 after several members led by Saudi Arabia overdelivered on a new agreement to cut production and as Libya’s supply slumped.