Oil hits 13-mth low on weak Chinese demand, traders eye OPEC+ cuts

The logo of the Organisation of the Petroleum Exporting Countries (OPEC) sits outside its headquarters ahead of the OPEC and NON-OPEC meeting, Austria December 6, 2019. (Reuters)
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Updated 10 February 2020

Oil hits 13-mth low on weak Chinese demand, traders eye OPEC+ cuts

  • Brent plumbs lowest levels in 13 months
  • OPEC+ considers cutting output by another 600,000 bpd

NEW YORK: Oil prices fell to their lowest since January 2019 on Monday on weaker Chinese demand in the wake of the coronavirus outbreak and as traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped over 25% from a peak in January after the spreading virus hit demand in China, the world’s largest oil importer, and fueled concerns of excess global supplies.
Brent futures fell 99 cents, or 1.8%, to $53.48 a barrel by 12:05 p.m. EST (1705 GMT), while US West Texas Intermediate crude fell 56 cents, or 1.1%, to $49.76.
That keeps both Brent and WTI in oversold territory for 13 days and 14 days, respectively, their longest bearish streaks since Nov. 2018. If Brent closes at its current level, it would be its lowest settle since December 2018.
The premium of the Brent front-month over the same WTI contract , meanwhile, fell to its lowest since August 2019 in intraday trade.
“The concern remains that the wider markets have yet to reflect the full impact of the disruption,” said Saxo Bank commodity strategist Ole Hansen.
“With China being the world’s most dominant consumer of raw materials, the impact continues to be felt strongly across key commodities and the world is facing the biggest demand shock since the 2009 global financial crisis.”
Beijing has orchestrated support for its companies and financial markets in the past week and investors are hoping for more stimulus to lift the world’s second-biggest economy.
Worries over supply were not alleviated on Friday when Russia said it needed more time to decide on a recommendation from a technical committee that has advised the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production by a further 600,000 barrels per day (bpd).
The group, known as OPEC+, has been implementing cuts of 1.2 million bpd since January 2019.
Algeria’s Oil Minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter.
Russia’s Energy Minister Alexander Novak said Moscow needed more time to assess the situation, adding that US crude production growth would slow and global demand was still solid.
“The lack of enthusiasm from the Russians to deliver an additional 600,000 barrels per day in deeper production cuts could prove cost in stabilizing prices in the short-term,” Edward Moya, senior market analyst at OANDA in New York, said in a report.
Oil traders also said they were concerned the proposed reduction would not be sufficient to tighten global markets as China’s state refiners have said they would cut refining throughput by about 940,000 bpd this month.


Saudi minister: OPEC+ will take responsible approach to virus

Updated 13 min 27 sec ago

Saudi minister: OPEC+ will take responsible approach to virus

  • Saudi Arabia supports the further oil production cut, but Russia is yet to announce its final position on the matter

RIYADH: Saudi Arabia’s energy minister said on Tuesday he was confident that OPEC and its partner oil-producing nations, the so-called OPEC+ group, would respond responsibly to the spread of the coronavirus.

He also said Saudi Arabia and Russia would continue to engage regarding oil policy.

“Everything serious requires being attended to,” the minister, Prince Abdul Aziz bin Salman, told reporters at an industry conference in Riyadh.

An OPEC+ committee this month recommended the group deepen its output cuts by an additional 600,000 barrels per day.

Saudi Arabia supports the further oil production cut, but Russia is yet to announce its final position on the matter.

The minister said he was still talking with Moscow and that he was confident of Riyadh’s partnership with the rest of the OPEC+ group.

“We did not run out of ideas, we have not closed our phones. There is always a good way of communicating through conference calls,” he said.

Regarding the coronavirus, which has impacted OPEC member Iran, he said OPEC+ members should not be complacent about the virus but added he was confident every OPEC+ member was a responsible and responsive producer.

The flu-like SARS-CoV-2 virus, which first broke out in China, has now spread to more than 20 countries.

“Of course there is an impact and we are assessing, but we’ll do whatever we can in our next meeting and we’ll address that issue,” UAE Energy Minister Suhail Al-Mazrouei said at the same industry conference.

Saudi Aramco CEO Amin Nasser on Monday said he expected a short-lived impact on oil demand.

“We think this is short term and I am confident that in the second half of the year there is going to be an improvement on the demand side, especially from China,” he said.

Oil climbed on Tuesday as investors sought bargains after crude benchmarks slumped almost 4 percent in the previous session, although concerns about the global spread of the virus capped gains.