Published: Thu, February 13, 2020
Markets | By Otis Pena

Oil edges down as traders assess China's oil demand

Oil edges down as traders assess China's oil demand

Oil held above $51 a barrel as investors shrugged off a government report showing US crude stockpiles rose for the third straight week.

The OPEC+ alliance had already faced an oversupply in the first half of 2020 because of the ongoing output surge from USA shale-oil drillers, the agency said.

Brent futures LCOc1 fell $1.20, or 2.2%, to settle at $53.27 a barrel, their lowest close since December 28, 2018, while U.S. West Texas Intermediate crude CLc1 fell 75 cents, or 1.5%, to settle at $49.57, the lowest close since January 7, 2019. The global crude benchmark traded at a $3.93 premium to WTI for the same month.

US gasoline refining margins RBc1-CLc1 rose to their highest since August due to a sharp 4.4% increase in gasoline futures. Still, global experts remained cautious over forecasting when the outbreak might peak.

Oil demand is set to fall year on year in the first quarter for the first time since the depths of the financial crisis in 2009 hurt by the coronavirus outbreak in China, the International Energy Agency (IEA) said on Thursday.

Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.

Second Coronavirus Case Confirmed, Third Patient Under Investigation
A previous case of coronavirus was documented on Monday among the same group of evacuees, the CDC said. Late Monday, CBS News reported that the CDC confirmed a 13th positive case of novel coronavirus .


The most recent Monthly Oil Market Report (MOMR) notes that "oil demand growth in 2020 is revised down by 0.23 mb/d from the previous month's assessment" as China, one of the largest consumers of oil, struggles to contain the coronavirus, and OPEC and its allies may take additional steps to rebalance the energy market as the Joint Technical Committee (JTC) "recommendedextending voluntary production adjustments under the "Declaration of Cooperation" process until the end of 2020".

For 2020 as a whole, the virus will curb annual growth in global consumption by about 30% to 825,000 barrels a day, the lowest since 2011.

The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday.

An OPEC+ technical committee last week recommended expanding production cuts to put a floor under falling oil prices, although there was some resistance from Russian Federation.

The new coronavirus has spread to more than 20 countries after emerging in December in China, where it has killed more than 400 people and infected 20,000.

Like this: