By Adedapo Adesanya
Oil prices continued to hold gains, although not strong enough, into the first day of the week despite the COVID-19 continuous pull on demand worries that has led to slowdown in China and other parts of Asia.
The coronavirus epidemic has negatively affected major Chinese economic activities, especially on the transport, tourism and industry with data showing decline following preventive measures.
However, Brent crude futures were up to 32 cents or 0.56 percent to trade at $57.64 per barrel, while the US West Texas Intermediate (WTI) crude rose 5 cents or 0.1 percent to $52.33 per barrel.
Oil prices rose last week for the first time since the first week of January. Analysts attributed this to optimism that measures put in place by the Chinese government could lead to a recovery in oil demand in China.
This week’s opening gains was also spurred by another lower demand forecast published by the International Energy Agency (IEA) last Friday which lowered its forecast for oil-demand growth for 2020 by 365,000 barrels a day to 825,000 barrel a day. Regarded as the slowest demand in almost 10 years, IEA said this was due to the coronavirus outbreak.
The US Energy Information Administration (EIA), just like the IEA last Tuesday, cut its global oil demand growth forecast for this year by 310,000 bpd, also saying that the virus was the reason for this.
On its own end, the Organization of Petroleum Exporting Countries (OPEC), which had been working effortlessly to help oil prices, also lowered its 2020 demand forecast for its crude by 200,000 bpd.
However, the producer group and its allies known as OPEC+ can do more for the market. All they need to do is to agree on further output cuts, which a member of the cartel, Russia, is reluctant to do, asking for more time to deliberate on the proposed move.
OPEC+ had recommended a further cut of 600,000 bpd until June 2020 that will keep supply stable and support oil prices.
The group last December has already signed an agreement to cut oil output by 1.7 million barrels per day until the end of next month and if this new deal is agreed, it means all OPEC+ members will combine to reduce their production now by 2.3 million barrels per day.
With the OPEC expected to meet on March 5 and 6, the decision will need to be reached before or during the meeting with considerations on the COVID-19 as death toll from the virus reached 1,770, including one in Japan. The number of cases of infection has increased to 70,548 globally as at Monday night.
Dipo Olowookere