Oil recovers on talk of Opec extending production cuts
Falling US crude inventories have also helped stabilise prices, which have been hurt by the spread of China’s coronavirus
London — Oil prices rose for a second day on Wednesday, recouping some losses after a five-day rout on talk that Opec could extend oil output cuts if a new coronavirus hurts demand, while data showing a decline in US stockpiles helped steady prices.
Brent crude rose 66c, or 1.1%, to $60.17 a barrel by 9.51am GMT. US crude was up 62c, or 1.2%, at $54.10 a barrel.
Financial markets that have been hit by the spread of the virus out of China are trying to assess the economic fallout, with the death toll rising to 132 and airlines reducing flights to China.
“While the coronavirus continues to spread both in and outside China the market is trying to adjust positions across all asset classes,” said Saxo Bank analyst Ole Hansen.
“Commodities, most of which depend on global growth and demand, have been caught in the crosshairs of these developments... China [is] the world’s biggest buyer of most commodities, from crude oil and fuel to copper and iron ore.”
British Airways suspended all direct flights to and from mainland China after Britain warned against all but essential travel to the country, and jet fuel demand has slumped in Asia as airlines have cancelled connections.
Opec wants to extend oil production cuts until at least June from March, and may deepen the reductions, should demand for oil in China be significantly reduced by the spread of the virus, Opec sources said.
Opec and its allies, including Russia, have been trying to stabilise prices amid questions over the global demand outlook and rising supplies, particularly out of the US.
“A further extension is a strong possibility and a deeper cut is a possibility,” one Opec source told Reuters. Any fallout of the China virus on oil demand is likely to be clearer over the coming week, the source said.
In the US, crude oil inventories fell by 4.3-million barrels last week, data from industry group the American Petroleum Institute showed on Tuesday, compared with analysts’ expectations of a gain of 482,000 barrels.
Gasoline stocks were up by 3.3-million barrels, compared with forecasts in a Reuters poll of a 1.3-million barrel gain.
Distillate fuel inventories, which include diesel and heating oil, fell by 141,000 barrels, against expectations of a 1-million barrel drop.
Official figures on oil and products are due out from the Energy Information Administration later on Wednesday.