Oil Market Outlook

Crude prices remained under pressure last week as the coronavirus outbreak started to take a bigger toll on the world economy and oil demand, while Chinese refineries cut production sharply.

Oil has fallen more than 12% this year as the viral outbreak has crippled Chinese industrial activity and transport at a time when crude supplies were already abundant. Still, prices posted a second consecutive weekly gain, supported by supply disruptions in Venezuela and Libya.

West Texas Intermediate (WTI) crude rose $1.33 to close at $53.38 per barrel. Brent climbed $1.18 to $58.50 and Dubai crude averaged $56.27. Thaioil forecasts that WTI this week will trade between $50 and $55, and Brent between $56 and $61. Prices are expected to increase slightly if the markets get a sense that the virus impact will be short-term. A Chinese government economic stimulus plan could also lift sentiment, as will the prospect of further cuts by Opec and its allies. Among the factors expected to influence trade:

■ As Chinese refiners slash crude orders because of weak demand for their products, the International Energy Agency has cut its forecast for first-quarter global oil demand by 435,000 bpd, or about 0.5%.

■ Beijing has taken a first step to stimulate a resumption of business activity, with the central bank cutting the one-year prime lending rate by 10 basis points to 4.05% and the five-year prime rate by 5 basis points to 4.75%, the first cuts since October.

■ The markets believe that Opec and its allies will deepen their output cuts by another 600,000 bpd from the previously pledged amount of 1.7 million bpd when they meet on March 6. But Opec is still waiting for a decision by Russia on whether it will cooperate. The Saudi energy minister dismissed a Dow Jones report on Friday that Riyadh was considering a break from its four-year oil production alliance with Russia.

■ Unrest in Libya since January has lowered the country’s crude production to only 140,000 bpd, from 1.2 million before rebel leader Khalifa Haftar began a blockade of the country’s ports. Libya is expected to lose the opportunity to sell up to US$1.6 billion worth of crude oil if the conflict is prolonged.

■ US crude inventories in the week to Feb 14 rose by only 414,000 barrels, much less than the 2.5-millionbarrel gain predicted by analysts in a Reuters poll, the Energy Information Administration said. US oil explorers added one oil rig last week, bringing the total to 679, compared with 853 a year ago.

■ Economic indicators to watch include revised US fourth-quarter GDP and euro-zone consumer prices.

For more information visit www.thaioilgroup.com or download the TOP Energy application for iOS or Android mobile devices.