Oil prices rose about 1% on Tuesday, up from 13-month lows as the number of new coronavirus cases slowed in China, easing some concern over the potential for lengthy oil demand destruction.
The death toll surpassed 1,000 on Tuesday, though the number of new confirmed cases fell. The epidemic may be over by April, said the Chinese government’s top medical adviser on the outbreak.
Brent crude LCOc1 settled at $54.01 a barrel, up 74 cents, or 1.4%, having dropped on Monday to its lowest since January last year at $53.11. U.S. West Texas Intermediate CLc1 crude settled at $49.94 a barrel, up 37 cents, or 0.8%.
“The market is trying to bottom, to be optimistic and look beyond the virus,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Investors remain wary that China’s oil demand could take a further hit if the coronavirus cannot be contained and if the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, fail to agree on further steps to support prices.
“The lack of any coordinated action by OPEC+ means that oversupply concerns are likely to retain the upper hand,” said Commerzbank analyst Eugen Weinberg.
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.
The U.S. Energy Information Administration cut its global oil demand growth forecast for this year by 310,000 bpd after the coronavirus outbreak.
Oil also got a boost from a rally in world equities, which resumed their climb towards record highs on Tuesday on hopes the virus is peaking.
OPEC and allies including Russia are restraining output by 1.7 million bpd in 2020 to support the market and have been considering further curbs.
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.
Oil prices pared gains in post-settlement trade after data from industry group American Petroleum Institute showed a bigger-than-expected build in U.S. crude stockpiles. [API/S]
Crude inventories rose by 6 million barrels last week, compared with analysts’ expectations for a build of 3 million barrels, API said.