By Adedapo Adesanya
Major crude futures prices gained on Wednesday, spurred by news that new cases of the deadly coronavirus in China has slowed.
The disease, renamed as Covid-19 by the World Health Organisation (WHO) this week, has affected the demand for oil since it started last December, but gained global attention last month.
As at last night, the Brent crude gained $2.10 or 3.89 percent to trade at $56.11 per barrel, while the US West Texas Intermediate (WTI) crude rose above the $50 mark after gaining $1.62 or 3.24 percent to settle at $51.56 per barrel.
Market analysts said that the growth rate of new coronavirus cases in China has slowed to the lowest since January 30 and this renewed investor hopes that China may begin to recover from the epidemic.
The epidemic, which has caused restrictions to be placed on travel to and from China, has lessened demand and brought about large inventories. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop to tackle oversupply.
China’s National Health Commission said on Wednesday that 2,015 new cases of the disease caused by a new strain of coronavirus that emerged in Wuhan, China had been reported over the last 24 hours, marking a second straight daily decline and if this continues, oil pries may continue on its path to recovery.
One other thing that helped prices to rise yesterday was the cut in the global oil demand growth forecast for this year by 310,000 bpd by United States Energy Information Administration (EIA). The agency said this was due to the virus that has killed over 1000 people.
On its part, the American Petroleum Institute (API) said that crude inventories rose by 6 million barrels in the week to February 7 to 438.9 million barrels, more than analysts’ expectations for an increase of 3 million barrels.
With increase in inventories adding to worries of an oversupplied market, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, recommended a further cut of 600,000 to help keep supply stable and prices performing better.
The cartel recommended extending the oil production cuts agreed last December to 2.3 million barrels and will last until the end of June 2020 but Russia’s reluctance to agree to the agreement continue to worry other producers who believe that the delay is affecting the market.
Modupe Gbadeyanka