Oil Extends Recovery as Traders Reassess Virus Threat to Demand
Oil continued its recovery from a three-month low as traders reassessed the threat to demand from China’s coronavirus, and as U.S. industry data showed a drop in crude inventories.
Futures traded near $54 a barrel in New York in tandem with improved sentiment across financial markets, which pushed equities slightly higher. While the number of confirmed infections in China has overtaken the official number recorded during the 2003 SARS epidemic, it’s still unclear how severely world oil consumption will be affected.
There are also further signs that supplies are tightening around the world. Libyan exports remain halted by a political dispute, while the American Petroleum Institute reported that nationwide stockpiles fell by 4.27 million barrels last week. Official government figures are due later on Wednesday.
“The main driver is risk sentiment,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “If strength in China’s demand isn’t there, then global demand growth will suffer very quickly. But market fundamentals are still on track to tighten towards the middle of the year.”
Traders have also taken some reassurance from comments by Saudi Arabia and other OPEC members that they’re prepared to act to shore up the market. The alliance, which has already cut production, will consider prolonging curbs to the end of the year — or even deepening them — when it gathers in early March, a delegate said on Jan. 27.
West Texas Intermediate for March delivery rose 49 cents to $53.97 a barrel on the New York Mercantile Exchange as of 10:10 a.m. London time. The contract settled up 0.6% on Tuesday.
Brent for March settlement advanced 0.9% to $60.04 a barrel on the London-based ICE Futures Europe exchange.
U.S. crude stockpiles are currently at a three-month low after big declines in December. Contrary to the API figures, analysts surveyed by Bloomberg are forecasting a 1.29 million-barrel increase in inventories ahead of the official Energy Information Administration data.