Oil prices cross $55 with OPEC+ split on output curbs

London, UK – Oil prices rebounded back beyond US$55 a barrel as OPEC+ on Wednesday entered a second day of discussions on the impact of the coronavirus outbreak.

Futures rose 3 per cent in New York, reversing some of the dramatic collapse across the futures curve this week that saw the market fall into a bearish contango structure - indicating oversupply. The recovery reflects speculation that OPEC+ talks in Vienna may result in an emergency ministerial meeting on fresh output cuts, as well as reports of a possible coronavirus vaccine, which have lifted broader markets.

Views differ on the potential impact of the deadly virus on demand, with BP Plc suggesting it could wipe out a third of global consumption growth this year, while OPEC’s own analysis indicates a modest drop of around 400,000 barrels a day for about six months. “The short-term damage to oil demand from China has already occurred,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “On that basis the upside potential may still depend on action from OPEC+.”

West Texas Intermediate for March delivery advanced 3 per cent to US$51.08 a barrel on the New York Mercantile Exchange as of 8.38am local time. Brent for April settlement rose 2.8 per cent to US$55.45 a barrel on the London-based ICE Futures Europe exchange.

Saudi Arabia is pushing for a production cut of at least 500,000 barrels a day and even as much as twice that amount, according to some OPEC+ delegates. But its efforts have repeatedly run up against Russia’s reluctance to make deeper curbs.

Technical experts from the group meet again on Wednesday to analyse the impact of the crisis on oil demand, which may help determine whether the alliance convenes a ministerial meeting later this month.

Adding to demand concerns, a US industry report showed an expansion in crude stockpiles last week. Figures from the American Petroleum Institute showed US inventories rose by about 4.2mn barrels.