LONDON/NEW YORK (Reuters) – Crude oil prices rose on Wednesday on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting a slump in demand caused by the coronavirus outbreak.
FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S., February 11, 2019. REUTERS/Nick Oxford
U.S. oil inventories grew less than anticipated, the U.S. Energy Department said Wednesday, and gasoline and diesel stocks fell more than expected.
Brent crude LCOc1 rose 35 cents, or 0.7%, at $52.24 a barrel at 11:03 a.m. ET (1603 GMT). U.S. West Texas Intermediate (WTI) CLc1 was up 66 cents, or 1.3%, at $47.80 a barrel.
Saudi Arabia and other OPEC members are seeking to persuade Russia on Wednesday to join them in large additional oil output cuts to prop up prices which have tumbled because of the coronavirus outbreak.
Many analysts have cut their estimates for oil demand in 2020, expecting reduced consumption as the coronavirus spreads.
“The market is going to be weighed down by the coronavirus impact on demand destruction,” said Andrew Lipow, president of Lipow Oil Associates. “I do not see oil demand recovering to pre-virus levels for several months, as additional outbreaks in Europe and the U.S. are going to cause travel and meeting disruptions and demand destruction.”
(Graphic: OPEC production vs. world demand here)
A technical panel of several representatives from OPEC states, Russia and other producers recommended on Tuesday cutting output by between 600,000 to 1 million barrels per day (bpd) during the second quarter only.
Iran’s oil minister Bijan Zanganeh said the market was facing a surplus.
“Right now, the supply in the market is greater than demand,” Zanganeh said. “It’s necessary for OPEC and non-OPEC to make all their efforts to balance the market.”
Goldman Sachs cut its Brent price forecast to $45 a barrel in April while expecting Brent gradually recovering to $60 a barrel by the year-end.
The bank said while an output cut by OPEC “will help normalize oil demand and inventories later this year, they can’t prevent an already started large oil inventory accumulation.”
Morgan Stanley cut its second-quarter 2020 Brent price forecast to $55 per barrel and its WTI outlook to $50 on expectations that China’s 2020 oil demand growth would be close to zero and that demand elsewhere may weaken because of the virus.
(Graphic: Crude prices fall as coronavirus cases rise – here)
The U.S. Federal Reserve cut interest rates on Tuesday in a bid to shield the world’s largest economy from the impact of the coronavirus, but the decision offered limited support for crude.
“Yet far from easing virus anxieties, the surprise move had the opposite effect. Market players fretted over the suddenness of the Fed’s decision,” said Stephen Brennock of oil broker PVM.
Crude oil stocks in the United States grew less than expected, rising by 785,000 barrels, while gasoline and diesel stocks both fell by more than 4 million barrels, the U.S. Energy Information Administration said.
Reporting by Bozorgmehr Sharafedin, additional reporting by Shu Zhang in Singapore; Editing by Bernadette Baum