By Adedapo Adesanya
Prices of crude oil shed gains late last week after earlier moving north at the beginning of the week, selling about $58 per barrel at a point. But demand worries reared its ugly head and affected the commodity at the global market.
The worries were majorly from the coronavirus spread, which continue to impact on the largest importer of crude oil, China, and also contributing to the weak economic data posted by the Asian giant.
The markets had earlier hit one-month highs in the week, but concerns about the Covid-19 impact on global demand growth suppressed this.
Almost three weeks after the Organisation of the Petroleum Exporting Countries (OPEC) and its allies’ met in Vienna, Austria, they have still been unable to settle a final decision about the additional 600,000 production cuts proposed by some members. If this issue is not resolved soon, crude oil may take a hit the new week.
Last week, market analysts pointed out three factors that contributed to the rise in crude oil prices earlier in the week. One was the the drop in the new cases of coronavirus, but the rise later in the week took a toll on the market.
Another incident that supported prices was China’s move to cut its benchmark lending rate on Thursday, helping put worries about slowing demand at ease. In addition, the sanction on a trading unit unit of Russian oil giant, Rosneft, by the United States for its ties with Venezuela’s state-run PDVSA, supported prices of crude oil.
Additionally, the Energy Information Administration (EIA) also added to gains even as it revealed on Thursday that crude supplies edging up by 400,000 barrels for the week-ended February 14 even as analysts were looking for a rise of 3.3 million barrels.
Looking into the new week, things are not look promising for crude oil as demand will continue to fall further before any tangible action will be taken. Trends show that traders are likely to keep pressure on crude oil because of an expected supply surplus in the first quarter of 2020 and the need for OPEC+ to take further action at their meeting in early March. Furthermore, the rapidly rising US Dollar is likely to lead to a drop in demand for dollar-denominated crude oil.
Last week, oil traders thought additional production cuts from OPEC+ were imminent, but Russian Energy Minister, Mr Alexander Novak disturbed any hope on Thursday when he said that global oil producers understood it would no longer make sense for OPEC and its allies to meet before their gathering in March.
Prices of Brent Crude amid this may fall to $55 per barrel while the US West Texas Intermediate (WTI) may dance around the $51 mark.
Dipo Olowookere