Very little price change has occurred with crude oil prices on Presidents’ Day after OPEC + has not yet decided to impose further production cuts to offset demand concerns caused by the coronavirus outbreak.
Brent crude LCOc1 was at $57.18 a barrel, down 14 cents, after rising 5.2% from last week, its biggest weekly gain since September 2019.
U.S. WTI crude CLc1 fell 1 cent to $52.04 a barrel, after a 3.4% gain last week.
“Nothing goes down forever, as they say, and oil appears to have finally shaken off bearish malaise,” said Stephen Brennock of oil broker PVM.
“Virus anxieties were put on the back burner. Investors cheered a salvo of stimulus measures from China’s central bank… sentiment was given a supportive jolt by expectations of a supply response from the OPEC+ producer alliance.”
The IEA predicted last week coronavirus would cause demand to fall by 435,000 barrels per day (bpd) in the first quarter of 2020. This being the first quarterly drop since the financial crisis 2009.
Some indicated that it is too soon to assess any economic fallout cause for any indication of the virus affecting global manufacturing supply chains, especially in Asia.
Brent crude oil futures prices have shifted into backwardation; near-term prices are higher than later-dated prices. This implies an under supplied market because investors anticipate that OPEC and its allies, including Russia, plan to deepen production cuts to tighten global supplies and support prices.
OPEC+ has an agreement to cut oil output by 1.7 million bpd until end of March but hasn’t decided to impose further cuts after the coronavirus fallout.
“The more recent strength that we have seen in the market may also make OPEC + complacent when it comes to taking action,” ING said in a note.
“Already the group has failed to bring forward the meeting that was originally scheduled for early March. And if the market consolidates around current levels, OPEC+ may see little need to rush a decision.”