Oil recovers from 13-month low as new coronavirus cases slow
Opec+ is still mulling cutting output by another 600,000 bpd, especially as US crude inventories are expected to rise
London — Oil rose to $54 a barrel on Tuesday, recovering from a 13-month low as the number of new coronavirus cases slowed in China, easing some concerns about a lasting hit to oil demand.
The death toll climbed above 1,000 on Tuesday, while the number of new confirmed cases fell. The epidemic may peak in February then plateau before easing, the Chinese government’s top medical adviser on the outbreak said.
Brent crude rose 82c to $54.09 a barrel by 10.08am GMT. It fell to $53.11 on Monday, the lowest since January 2019. US West Texas Intermediate (WTI) crude was up 72c at $50.29.
Investors remain wary that China’s oil demand could take a further hit if the coronavirus cannot be contained and if oil cartel Opec and its allies (Opec+), fail to agree on further steps to support prices.
“Though oil is recovering again today, the lack of any co-ordinated action by Opec+ means that oversupply concerns are likely to retain the upper hand,” said Eugen Weinberg, analyst at Commerzbank.
The virus is already denting demand in the world’s second-largest oil consumer. Chinese state refiners plan to cut as much as 940,000 barrels per day (bpd) — almost 1% of world demand — from their crude processing rates in February.
Oil rose alongside a rally in world equities, which resumed their rise towards record highs on Tuesday on hopes the virus is peaking. But some analysts said concerns about the virus and oil demand would likely resurface.
The rally “seems to be more of a technical retracement than a general belief that the epidemic has run its course”, Tamas Varga of oil broker PVM said.
Opec+, which includes Russia, is restraining output by 1.7 million bpd in 2020 to support the market, and have been weighing a further curb to stem fallout from the virus.
An Opec+ advisory panel proposed an additional cut of 600,000 bpd last week, but Russia has delayed delivering its official stance, frustrating some Opec members.
In a development that could add downward pressure on prices, US crude inventories are expected to rise for a third straight week, by 2.9-million barrels in the week ended on February 7, a Reuters poll showed.
US supply reports are due later on Tuesday and on Wednesday.