Oil Slides Lower on China Demand, OPEC+ Cuts Worries

Florence Tan
Monday, February 10, 2020

Oil prices slipped lower on Monday as traders assessed China's oil demand following the coronavirus outbreak and waited to see if major producers will cut output further to balance markets. 

Oil is off more than 20% from peaks struck in January after a spreading virus hit demand in the world's largest oil importer and fuelled concerns of excess supplies. 

Brent crude slipped to $53.63 a barrel in early Asian trade, the lowest since Jan. 2, 2019, before recovering to $54.32 by 0804 GMT, down 15 cents. U.S. West Texas Intermediate fell 17 cents to $50.15 a barrel after striking a low of $49.56. 

"The overall sentiment is still bearish but markets are oversold," said Avtar Sandu, a senior commodities manager at Phillips Futures in Singapore. He said traders took profit from short-selling after prices hit technical support levels. 

Beijing has orchestrated support for its companies and financial markets in the past week and investors are hoping for more stimulus to lift the world's second-biggest economy. "Normally it takes at least two quarters before things start to pick up but there's always hope for new stimulus in the market that will buoy the economy," Sandu said. 

Worries over supply were not alleviated on Friday when Russia said it needed more time to decide on a recommendation from a technical committee that has advised the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production by a further 600,000 barrels per day (bpd). 

Algeria's oil minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter. "The coronavirus epidemic has a negative impact on economic activities, especially on the transport, tourism, and industry, in China particularly, and also increasingly in the Asian region and gradually in the world," Arkab said. 

Russia Energy Minister Alexander Novak said Moscow needed more time to assess the situation, adding that U.S. crude production growth would slow and global demand was still solid. 

The proposal for the further cuts "failed to alleviate the pressure on oil, in part because the proposal has yet to be formally discussed by OPEC ministers and because Russia continues to push back against further cuts," Stephen Innes, chief market strategist at AxiCorp said in a note. "If the cartel fails to reach an agreement, there will be more pain to come in oil (on the) downside." 

Oil traders also said they are concerned the proposed reduction would not be sufficient to tighten global markets as China's state refiners have said they will cut refining throughput by about 940,000 bpd this month. 

(Reporting by Florence Tan; Editing by Sam Holmes, Christian Schmollinger, and Tom Hogue) 


Categories: Energy Middle East Oil Production Asia China

Related Stories

CNOOC Puts Into Production New Oil Field in South China Sea

Petrovietnam, Petronas Extend PSC for Offshore Block

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

All Gas from Conrad’s Mako Field to be Sold to Indonesia’s PLN

Valeura Wraps Up Infill Drilling Campaign in Gulf of Thailand

Eco Wave Finds Partner for Wave Energy Project in India

ONGC and BP Sign Deal to Boost Production at India's Largest Offshore Oil Field

Abu Dhabi's NMDC Group Gets $1.1B Subsea Gas Pipeline Job in Taiwan

Europe's Gas Uncertainty Help Drive Asian LNG Spot Prices Higher

ADES’ Fourth Suspended Jack-Up Rig Gets Work Offshore Thailand

Current News

The Future of Long-Idle Drillships: Cold-Stacked or Dead-Stacked?

TMC Books Compressors Orders for FPSO and LNG Vessels

MODEC, Sumitomo Partner Up for Delivery of Gato do Mato FPSO

Chuditch Gas Field Up for Summer Drilling Ops as Sunda Reshapes Ownership Structure

EnQuest Bags Two Production Sharing Contracts off Indonesia

Hanwha Drilling’s Tidal Action Drillship En Route to Petrobras’ Roncador Field

China's ENN, Zhenhua Oil Ink LNG Supply Deals with ADNOC

MODEC Wins ExxonMobil Guyana’s Hammerhead FPSO Contract

India Stretches Bids Deadline for 13 Offshore Deep-Sea Mineral Blocks

Indonesia Awards Oil and Gas Blocks to Boost Reserves

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com