Oil prices steady but set for weekly gain on supply cut optimism

Oil prices steady but set for weekly gain on supply cut optimism”

Brent is 3.3% higher for the week, the first increase since the week of January 10.

U.S. West Texas Intermediate (WTI) futures were down by 1 cent to $51.41 a barrel. On Thursday, the Chinese authorities announced that the virus has already killed more than 1,300 people, while the number of cases has reached almost 60,000.

However, market sentiment improved as factories in China started to reopen and the government eased its monetary policy. Global airlines have also halted flights to China.

But other analysts caution the demand impact is only limited to China so far.

Global oil demand will drop this quarter for the first time in over a decade as the coronavirus batters China's economy, the International Energy Agency said.

However, the Organization of the Petroleum Exporting Countries and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day in response to the demand slump.

Oil demand in China has dropped already because of the virus and the Organization of the Petroleum Exporting Countries has lowered its 2020 demand forecast for its crude by 200,000 bpd, prompting expectations that OPEC and its allies including Russian Federation could agree further supply cuts when they next meet, possibly later this month.

"Lower oil prices, if sustained, are also bad news for highly responsive United States oil companies, but we are unlikely to see an impact on output growth until later in the year", the agency said.

Oil refiner China National Chemical Corp said on Thursday that it would close a 100,000 bpd plant and cut processing at two others amid falling fuel demands.

"The decision ultimately rests with the Kremlin, and if favourable, then we are likely to see a relief rally in oil, arguably mitigated by recent USA dollar strength", said Tchilinguirian.

UBS investment bank said in a note that commodity demand concerns were likely to linger and "the asset class should display a fair bit of volatility in the coming weeks".

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