By Adedapo Adesanya
Major crude futures prices were mixed on Wednesday as there was a larger-than-expected build in US crude inventories amid fear of crippling demand caused by the spread of coronavirus.
On Wednesday, the Brent crude was trading up at 12 cents or 0.19 percent to trade at $58.93 per barrel, while the US West Texas Intermediate crude shed 18 cents or 0.34 percent to settle at $53.30 per barrel.
The Energy Information Administration (EIA) yesterday said in its weekly report that crude inventories rose by 3.5 million barrels in the week to January 24 to 431.7 million barrels, this was higher than analysts’ from Reuters expectations for a 482,000-barrel rise.
Also, the poll by S&P Global Platts forecast a rise of 1.4 million barrels, while the American Petroleum Institute (API) on Tuesday reported a decline of 4.3 million barrels.
The coronavirus pandemic in the largest oil importer, China, also continued to affect demand which could rise to 300,000 barrels per day with the latest reports showing that British Airways has suspended all direct flights to and from mainland China after Britain warned against all but essential travel to the country.
Meanwhile, also affecting demand due to restrictions on travel, jet fuel demand has dropped in Asia as airlines have cancelled connections as the virus has killed over 160 people, all of them in China. Also, close to 6,000 others have been infected in more than a dozen countries.
With these worries escalating, the Organization of the Petroleum Exporting Countries (OPEC) wants to extend oil production cut until at least June, from March, and could deepen the reductions if demand for oil in China reduces significantly by the spread of the virus.
The oil cartel had increased its 2020 world oil demand growth forecast by 140,000 barrels to 1.22 million barrels a day, while also projecting a rise in its global economic growth forecast to 3.1 percent for the year, however this may since take a hit with challenges faced in a market threatened by oversupply.
OPEC and some non-OPEC allies such as Russia have been curbing production by 1.7 million barrels after signing an agreement to prevent an oil glut and support oil prices above $60 per barrel in December with the deal set to expire in March.
The talk of OPEC’s plan to stabilise prices amid panic helped the market but there are however many challenges facing the organisation regarding the commodity, especially the issue of global demand outlook and rising supplies in Non-OPEC producers like the United States, Norway, Brasil, Australia, and Guyana.
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