Opec committee urges output cut over coronavirus

Daniel Fowler
February 13, 2020

Those were the highest settles for both futures since January even though the USA government reported a larger-than-expected weekly build in crude inventories that was countered by a decline in fuel stocks, including an unexpected gasoline drawdown.

West Texas Intermediate crude for March fell 0.5% to US$50.07 a barrel on the New York Mercantile Exchange as of 9.37am in Singapore after dropping as much as 1.5% earlier.

However, Russia has been hesitant to commit to the additional cut, while Saudi Arabia wanted global major oil producers to agree a quick oil supply cut.

Brent crude was up $1.72, or 3.16%, at $55.88 per barrel. Still, worldwide experts remained cautious over forecasting when the outbreak might peak.

Oil traders also said they were concerned the proposed reduction would not be sufficient to tighten global markets as China's state refiners have said they would cut refining throughput by about 940,000 bpd this month.

The outbreak has shuttered businesses and prompted the quarantine of tens of millions of people in China, the world's biggest crude importer.

Lower-than-expected oil consumption in the OECD trimmed 2019 oil demand growth to 885,000 bpd.

Coronavirus death toll jumps by record 242 in just one day
In a statement, the Hubei health commission said it would now include cases that were "clinically diagnosed" in its official toll. About 56 million people in Hubei and its capital, Wuhan, are being banned from leaving as part of the quarantine efforts.

OPEC on Wednesday cut its forecast for growth in global oil demand as well due to COVID-19.

The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday.

In its monthly report, OPEC said that world oil demand is now expected to rise by 990,000 barrels per day (bpd) this year - roughly 19 percent less than previously forecast.

Last week, a technical panel advising OPEC and its allies, a grouping known as OPEC+, recommended an immediate additional output cut of 600,000 bpd. The Energy Information Administration reported that nationwide crude inventories rose 7.46 million barrels last week, more than double the 3.2 million-barrel increase forecast by analysts in a Bloomberg survey.

Wednesday's report comes after OPEC members and their allies, including Russian Federation, last week were unable to reach an agreement to deepen production cuts.

The revised forecast for global oil demand could bolster the case for even more production curbs.

"Oil markets are continuing to experience downward pressure from the coronavirus health crisis, which has brought China's transport and manufacturing sectors to a virtual standstill", analysts at Eurasia Group said in a report.

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