Oil eases as coronavirus spike stokes demand concerns

OPEC cut oil demand forecast, citing economic dislocations caused by virus

LONDON/ SINGAPORE:

Oil prices edged down on Wednesday under pressure from growing concerns that a recovery in fuel demand will be stalled by soaring coronavirus cases around the world.

Brent crude futures LCOc1 for December fell by $0.06 to $42.39 a barrel by 0953 GMT while US West Texas Intermediate CLc1 futures were down $0.05 at $40.15.

“There is a risk that the demand recovery is stalled by the recent increase in Covid-19 cases in many countries,” the International Energy Agency said on Wednesday.

“The longer term offers little encouragement for producers; the curve shows prices not reaching $50 per barrel until 2023. Truly, those wishing to bring about a tighter oil market are looking at a moving target.”

The Organisation of the Petroleum Exporting Countries (OPEC) cut its oil demand forecast on Tuesday, citing economic dislocations caused by the virus.

The heads of two of the world’s biggest oil producers, Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed bin Salman, discussed the situation in energy markets during a telephone call, the Kremlin said on Tuesday.

OPEC and producer allies such as Russia, a group known as OPEC+, will stick to plans to taper oil production cuts from January, United Arab Emirates Energy Minister Suhail al-Mazrouei said.

“Crude prices are looking very vulnerable as the coronavirus continues to spread like wildfire across Europe and trending higher in the US,” said Edward Moya, a senior market analyst at Oanda.

US crude oil inventories were seen falling last week while distillate stockpiles are likely to have declined for a fourth week, a preliminary Reuters’ poll showed.

The poll was conducted ahead of reports from the American Petroleum Institute and the Energy Information Administration. Both the reports were delayed by a day because of a public holiday in the United States on Monday.