Oil price gains hold while Russia keeps OPEC+ waiting on output cut

By Jackie Davalos and Grant Smith on 2/11/2020

LONDON (Bloomberg) - Oil advanced from a one-year low even as Russia kept OPEC+ waiting on a decision about whether to cut production in response to the coronavirus outbreak.

Futures climbed as much as 2.3% in New York on Tuesday, following equities higher. Energy Minister Alexander Novak said that Moscow is “studying” the OPEC+ output-cut plan after days of hesitation, calling the situation “extremely unstable.” Novak is set to meet with Russia’s oil companies on Wednesday.

“We’re seeing some optimism given Russia is still looking at the proposal,” said Bob Yawger, futures director at Mizuho Securities USA. “They’re not saying no outright."

The Organization of Petroleum Exporting Countries and its allies have fanned speculation that they might intervene to stabilize the oil market as the outbreak causes severe economic disruption in China. Morgan Stanley cut its oil demand growth forecast for 2020 by 15% amid plunging passenger transport volumes.

The group’s technical experts recommended last week that the coalition deepen current supply curbs by 600,000 barrels a day to drain excess inventories.

Amid the supply glut, top oil traders such as Vitol SA, Royal Dutch Shell Plc and Litasco SA are resorting to storing crude on tankers at sea. One Chinese energy company has invoked a legal clause to avoid taking delivery of liquefied natural gas.

West Texas Intermediate crude for March delivery rose 75 cents to $50.32 on the New York Mercantile Exchange at 11:05 a.m.

Brent crude for April settlement rose $1.10 to $54.37 a barrel on the ICE Futures Europe exchange in London. A “contango” structure -- where each monthly contract is cheaper than the next -- continues to tighten its grip, suggesting oversupply.

Complicating the situation is the potential restart of Libyan oil production that could possibly outpace any potential additional OPEC+ cuts in terms of time and size, JBC Energy said in a note.

The death toll from coronavirus topped 1,000 and Beijing urged a resumption of industrial activity following an extended holiday.

“Even after economic activity resumes, the hit to tourism, transport and supply chain will persist until and beyond the virus is eradicated,” said Frances Hudson, global thematic strategist at Aberdeen Standard Investments. The virus will have a “larger impact than SARS both in absolute terms and because China, where growth was already slowing, is a much larger part of the equation,” Hudson said.

Related News ///

FROM THE ARCHIVE ///

Comments ///

Comments

{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}