Oil rises, but potential impact of China virus on fuel demand haunts market
SINGAPORE (Reuters) – Oil prices climbed on Friday, following a drawdown in U.S. crude stocks, but were set to fall heavily for the week amid worries that a new coronavirus in China that has killed 25 so far may spread, curbing travel, fuel demand and economic prospects.
FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford
Brent crude futures LCOc1 were up 31 cents, or 0.5%, at $62.35 a barrel by 0741 GMT after falling 1.9% the previous session. For the week, Brent is down about 4%.
U.S. West Texas Intermediate futures CLc1 were up 27 cents, or 0.5% higher at $55.86 a barrel. The contract fell 2% on Thursday and is 4.6% lower for the week.
“Oil’s sell-off (for the week) continued at pace as fears continued about the effects on global demand from a virus-induced economic slowdown in Asia,” said Jeffrey Halley, senior market analyst, OANDA. “We would expect the fragility in oil prices to continue.”
Offering support for prices was news that U.S. crude oil and distillate inventories fell last week, the Energy Information Administration said on Thursday.
Though they failed to match analysts’ expectations in a Reuters poll of a 1 million barrel drop, crude inventories did decline by 405,000 barrels in the week to Jan. 17, government data showed.
“(The) sell-off on the … flu scare was mollified by a timely decline in U.S. crude inventories,” said Stephen Innes, market strategist at AxiTrader.
The virus has infected more than 800 so far in China, with 25 dead as of Thursday, according to China’s National Health Commission. The World Health Organisation has declared the situation an emergency, but stopped short of declaring the epidemic of international concern.
Most of the cases are in the central Chinese city of Wuhan, where the virus is believed to have originated late last year, though cases have now been found in at least seven other countries.
“Oil prices could remain on a slippery slope as traders remain incredibly twitchy about the effects the coronavirus outbreak could have on Chinese GDP and air travel more broadly,” said AxiTrader’s Innes.
Reporting by Roslan Khasawneh and Koustav Samanta; Editing by Kenneth Maxwell