Oil price edges up on Opec production cuts hopes
Oil prices showed signs of recovery this morning as officials from oil cartel Opec were set to meet in Vienna to discuss the rapid fall in prices due to China’s coronavirus outbreak.
Brent crude clawed back 0.7 per cent to reach $54.92, whilst West Texas Intermediate, which on Monday breached the $50 mark, gained 1.5 per cent at $50.88.
The last two weeks have seen global benchmark Brent crude plunge over $10 dollars as the world’s biggest economy reacted to the virus, which has now killed 420 people.
The drop, of roughly 24 per cent, means that oil has now entered a bear market, with Brent crude now trading at its lowest levels in over a year.
According to BP’s finance chief Brian Gilvary, the drop in demand caused by the outbreak of the disease will reduce oil consumption by 300,000 to 500,000 barrels per day.
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Opec officials will discuss whether to bring forward March’s meeting, in which the group is due to decide on whether to prolong or deepen production cuts, to 14-15 February.
Russia, which is one of a number of allies that form a wider group known as Opec+, said it was “ready to cooperate” with the producer group.
Russian President Vladimir Putin discussed the oil situation with de facto Saudi Arabian leader Mohammed bin Salman over the phone yesterday.
The group is reportedly considering extra cuts of 500,000 barrels per day, which would add to the 1.7m barrel curb agreed at its last meeting in December.
Margaret Yang, analyst at CMC Markets, said although this was the level expected, “we won’t rule out an even deeper cut should the situation worsen”.
Neil Wilson, chief markets analyst at markets.com, said: “What initially was thought to be a temporary hit to the market now looks demand destruction proper. This kind of oil demand shock has not been seen for over a decade. The longer the lockdown in China and travel restrictions globally the greater the impact.”