Oil rises amid hope for short economic hit from coronavirus outbreak
Reuters
Published Feb 19, 2020 02:44AM ET
Oil rises amid hope for short economic hit from coronavirus outbreak
By Aaron Sheldrick
TOKYO (Reuters) - Oil prices rose on Wednesday, with Brent gaining a seventh straight day, amid broad optimism as new coronavirus cases fell for a second day in China and concerns rose over supply after a U.S. move to cut more Venezuelan crude from the market.
Brent crude (LCOc1) was up by 51 cents, or 0.9%, at $58.26 a barrel by 0732 GMT, while U.S. oil (CLc1) was up 55 cents, or 1.1%, at $52.60 a barrel.
China is still struggling to get manufacturing going again in the world's second-largest economy, after imposing stringent city lockdowns and travel restrictions to contain the virus that has now killed more than 2,000 people, but investors remain optimistic that the economic fallout may be short-lived.
S&P Global (NYSE:SPGI) Ratings said it expected that coronavirus will deliver a "short-term blow" to economic growth in China in the first quarter.
Official data showed that new cases in China fell for a second straight day, although the World Health Organization has cautioned there is not enough data to know if the epidemic was being contained. [nL4N2AJ0J2]
Brent has risen nearly 10% since last week falling to its lowest this year so far, most recently supported by a U.S. decision on Tuesday to blacklist a trading subsidiary of Russia's Rosneft (MM:ROSN) that President Donald Trump's administration said provides a financial lifeline to Venezuela's government.
The United States slapped sanctions on Rosneft Trading SA, the Geneva-based unit.
The Swiss subsidiary "has been Venezuela's primary conduit for brokering cargos, which find their way predominantly to refineries in India and China," said Stephen Innes, chief market strategist at AxiCorp.
"Throttling this Asian supply channel will provide some support for oil prices," he said.
Prices have also been supported by hopes that the Organization of the Petroleum Exporting Countries (OPEC) and its allies will deepen supply cuts.
The grouping, known as OPEC+, has been withholding supply to support prices and meets next month to decide a response to the downturn in demand resulting from the coronavirus epidemic.
OPEC+ wants to "prevent the emergence of a large supply overhang caused by slumping demand amid the health crisis centered in China, the world's biggest importer of crude oil," Eurasia Group said in a note.
But in the U.S., which is not party to any supply cut agreements, crude oil production has been rising as shale output grows. Shale production in the U.S. is expected to rise to a record 9.2 million barrels a day next month, according to the Energy Information Administration.
(GRAPHIC: U.S. rig count, crude production - https://fingfx.thomsonreuters.com/gfx/editorcharts/US-OIL-RIGS/0H001PBQ55VR/eikon.png)
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.