WEEKLY ENERGY RECAP: Oil price fights infection

WEEKLY ENERGY RECAP: Oil price fights infection
China will be able to soften the crude oil demand hit from coronavirus after the government reported the lowest number of new cases. (AP/File)
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Updated 23 February 2020

WEEKLY ENERGY RECAP: Oil price fights infection

WEEKLY ENERGY RECAP: Oil price fights infection
  • Of greater concern is the big drop in demand for oil in China — especially from Russia

Crude oil prices recorded their second weekly gain despite the pall of coronavirus hanging over commodity markets. 

Brent crude advanced to $58.50 per barrel and WTI rose to $53.46 per barrel on optimism that China will be able to soften the crude oil demand hit from coronavirus after the government reported the lowest number of new cases.

Nevertheless, oil has lost about 15 percent since the beginning of the year on fears that the outbreak will squeeze global energy demand.  Now the market is wondering if it is possible for the Brent price to break the $60 barrier before OPEC’s much anticipated meeting in early March.

While supply disruptions in Libya continue to affect the market, analysts have grown somewhat weary with their impact.

Of greater concern is the big drop in demand for oil in China — especially from Russia, where the spot price for Russian East Siberia Pacific Ocean crude (ESPO) has weakened further.

Lower Chinese refinery demand has caused floating storage to accumulate offshore in China where most of these idling (anchoring) very large crude carriers have been loaded with March barrels and not yet with April deliveries. 

The market has also started to see the impact on lower refining margins in Asia and Europe.

This is largely as a result of lower demand for petroleum refined products — especially for the Jet fuel which has been affected by global flight restrictions related to coronavirus.

Jet fuel prices are now expected to fall to near-record lows. 

Lower demand for petroleum-refined products in China has led Beijing to cut gasoline and diesel retail prices for the second time in 2020. 

This reflects China crude oil demand, which has fallen by about a third.

The US Energy Information Administration (EIA) lowered its outlook for crude oil demand growth.

That took into account not only coronavirus but also lower-than-expected heating fuel consumption caused by the Northern Hemisphere’s warmer winter.


IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
Updated 9 min 5 sec ago

IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
  • IMF had rapidly increased concessional financing to emerging market and developing economies

WASHINGTON: The head of the International Monetary Fund on Monday said the global lender needed more resources to help heavily indebted countries, citing a highly uncertain global economic outlook and a growing divergence between rich and poor countries.
IMF Managing Director Kristalina Georgieva, who has long advocated a new allocation of the IMF’s own currency, Special Drawing Rights (SDRs), said doing so now would give more funds to use address both the health and economic crisis, and accelerate moves to a digital and green economy.
Under outgoing President Donald Trump, the United States, the IMF’s largest shareholder, has blocked such a new SDR allocation, a move akin to a central bank printing money, since it would provide more resources to richer countries since the allocation would be proportionate to their shareholding.
Swedish Finance Minister Magdalena Andersson, the new chair of the IMF’s steering committee speaking at an online news conference with Georgieva, said it was clear the need for liquidity remained great, and she would consult with member countries on options for expanding liquidity.
Andersson, the first European to head the International Monetary and Financial Committee in more than 12 years and the first women, started her three-year term in the role on Monday.
Georgieva said the IMF had rapidly increased concessional financing to emerging market and developing economies, including through donations by member countries of some $20 billion in existing SDRs. That would continue to play an important role, but further steps were needed, she said.
“It will continue to be so important, even more important, for us to be able to expand our capacity to support countries that have fallen behind,” Georgieva said.
She said a new SDR allocation had never been taken off the table by IMF members, she said, adding that some members continued to discuss it as a possible move. A possible sale of gold from the IMF’s reserves would have “some opportunity costs” for the IMF, but would be up to members, she said.
She said she expected the Group of 20 major economies to extend the current moratorium in official debt service payments by the poorest countries, now slated to end in June, but much would depend on the pace of vaccinations in coming months.