SEOUL (Reuters) – Oil prices were mixed on Thursday as concerns about falling demand caused by travel restrictions tied to the coronavirus outbreak in China, the world’s biggest oil importer, outweighed expectations of supply cuts from major producers.
FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo
Brent crude LCOc1 fell 8 cents, or 0.1%, to $55.71 per barrel at 0533 GMT. U.S. West Texas Intermediate (WTI) CLc1 rose 7 cents, or 0.1%, to $51.24 a barrel. Brent rose 3.2% on Wednesday while WTI gained 2.5% as a slowdown in new Chinese coronavirus cases boosted expectations of a demand recovery.
However, Hubei province, the epicenter of the outbreak, said on Thursday the number of new confirmed cases there jumped by 14,840 on Feb. 12 to 48,206, and deaths climbed by a daily record of 242 to 1,310, reflecting changes to the diagnostic methodology.
Oil demand in China, the world’s second-largest crude consumer, has plunged because of travel restrictions to and from the country and quarantines within it. Another Chinese oil refiner China National Chemical Corp said on Thursday it would close a 100,000 barrel-per-day plant and cut processing at two other amid falling fuel demand.
“Oil’s rally lost some momentum after China reported a sizable jump in new virus cases,” said Edward Moya, senior market analyst at OANDA.
However, even with the increase in cases pressuring crude, “oil prices are seeing some support from progress that the Russians may finally sign off on the OPEC+ additional production cuts,” he said.
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+ may 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 (LKOH.MM) official said on Wednesday.
Brent and WTI have fallen more than 20% from their 2020-peak in January because of the disease outbreak.
The expectations for lower future fuel demand because of the virus has shifted the market structure for both Brent and WTI into a contango, when prompt prices are less than later prices.
The front-month Brent futures contract, for April, is currently at a 55-cent discount to the September future. LCOc1-LCOc6
Reflecting 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.
Reporting By Jane Chung; Editing by Christian Schmollinger