Economy

Crude oil prices fall as coronavirus death toll climbs, U.S. inventories grow

Crude oil prices fall as coronavirus death toll climbs, U.S. inventories grow”

USA oil inventories fell last week, data from industry group the American Petroleum Institute showed on Tuesday, compared with analysts' expectations of a gain of 482,000 barrels.

Fears of the virus impact on oil demand are increasing as major airlines cancelled or reduced direct flights to China and travel advisories issued by different governments led to drop in the number of passengers.

In the Reference case, US crude oil production reaches 14.0 million barrels per day by 2022 and remains near this level through 2045 as tight oil development moves into less productive areas and well productivity declines. Brent is still down 2.5 per cent for the week.

Traders have also taken some reassurance from comments by Saudi Arabia and other OPEC members that they're prepared to act to shore up the market.

Still, the prevailing mood about the crude market for the immediate future was pessimistic: Stephen Brennock, oil analyst at PVM Oil Associates, stated, "Will deeper OPEC supply curbs provide the panacea for the current oil market malaise?" It has dropped around 14 per cent so far in January. Distillate stockpiles fell by 1.3 million barrels, versus consensus expectations for a draw of about 1.1 million barrels.

Oil was mixed on Wednesday as worries about the impact of the coronavirus outbreak and swelling crude inventories in the United States weighed on prices, while talk that OPEC could extend oil output cuts provided support. Futures for the precious metal were up 0.414 percent to $1,576.90 per barrel. Any fallout of the China virus on oil demand is likely to be clearer over the coming week, the source said.

The Senior Commodity Strategist at Goldman Sachs, Damien Courvalin, said the global oil demand could potentially fall by 260,000bpd, hitting the aviation sector the hardest. In a conservative scenario, the potential movement could boost the price until $55.87 per barrel.

"There isn't a compelling case crude needs to go lower until we know more about how bad the demand destruction from the coronavirus epidemic is going to be", said Stratfor oil analyst, Greg Priddy.

Still, ING cautioned that outages in Libya - where production has been steadily declining amid a blockade - should not be discounted.



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