Oil Market Outlook
Crude prices rose last week amid signs that the worst economic impacts of the coronavirus outbreak have been accounted for, even as forecasters said demand in this quarter would fall for the first time in a decade.
Investors also believe that Opec and its allies are likely to deepen their output cuts by up to 600,000 barrels a day through the second quarter to stabilise prices.
West Texas Intermediate (WTI) crude rose $1.73 to close at $52.05 a barrel. Brent climbed $2.85 to $57.32 and Dubai crude averaged $55.09. Thaioil forecasts that WTI this week will trade between $49 and $54, and Brent between $54 and $59. Prices are expected to remain low amid near-term concerns about the impact of the virus on economic activity, travel and fuel demand. Among the factors expected to influence trade:
World fuel consumption — previously expected to grow by 800,000 barrels per day in the first quarter compared with a year earlier — will instead contract by 435,000 bpd, the International Energy Agency said last week. It reduced its full-year growth forecast by 30% to 825,000 bpd, the lowest since 2011.
Two-thirds of China’s passenger planes have been grounded as travel restrictions sparked by the virus outbreak batter passenger numbers. The Civil Aviation Administration of China (CAAC) said passengers carried by Chinese airlines from Jan 27 to Feb 12 totalled 10.2 million, down 70% from the same period a year ago.
Petrochina, China’s national oil company, has cut production by around 320,000 bpd, or 9.6%, from its total capacity of 3.3 million bpd. Sinopec and China National Offshore Oil have cut their output by a combined 620,000 bpd.
US crude inventories in the week to Feb 7 rose by 7.5 million barrels, higher than forecasts of 3 million, as crude imports increased by more than 800,000 bpd.
Opec and its allies are still debating whether to reduce output by another 600,000 bpd in addition to the already pledged amount of 1.7 million bpd. However, Russia is resisting the idea and a special meeting planned for this month now appears unlikely to happen.
China halved its tariffs on US crude imports to 2.5%, effective from Feb 14, as part of a series of reductions in line with the phase-one trade agreement with the US.
Economic indicators to watch include a Chinese central bank monetary policy meeting and the release of the minutes of the last ECB meeting.
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