Oil prices edged higher on Thursday as investors focused on the possibility of deeper supply cuts from the world’s biggest producers.
The steady pricing comes on the heels of the Organization of the Petroleum Exporting Countries (OPEC) lowering its 2020 demand forecast for its crude by 200,000 barrels per day (bpd) on Wednesday. It cited concerns surrounding the coronavirus outbreak in China, the world’s biggest oil importer.
Brent crude was up 32 cents, or 0.6 percent to $56.11 a barrel, and the United States‘ West Texas Intermediate crude oil (WTI) increased by 14 cents to $51.31 a barrel.
US gasoline futures jumped more than one percent supported by outages at ExxonMobil Corp’s 502,500 bpd Baton Rouge refinery in Louisiana and Phillips 66’s 285,000-bpd Bayway refinery in New Jersey.
OPEC and its allies, a group known as OPEC+, could agree to further output cuts when they next meet, possibly as early as this month. The organisation and its allies led by Russia have implemented such curbs since 2017 to revive prices that had become depressed by a glut of crude.
“The Russians have pretty much signalled that everyone is on board for OPEC+ delivering deeper production cuts,” said Edward Moya, senior market analyst at OANDA Corporation in New York.
“As long as the coronavirus does not show strong signs that the spreading of the virus is intensifying, WTI crude could make a run towards the mid-$50s,” he added.
Oil demand in China, the world’s second-largest crude consumer, has plunged because of travel restrictions to and from the country and quarantines within it. Hubei Province, the epicentre of the outbreak, said on Thursday that the number of new confirmed cases there jumped by 14,840 to 48,206 on February 12 and deaths climbed by a daily record of 242 to 1,310.
Oil refiner China National Chemical Corp said on Thursday that it would close a 100,000 bpd plant and cut processing at two others amid falling fuel demands.
The International Energy Agency expects oil demand in the first quarter to fall for the first time in 10 years before picking up in the second quarter. The agency cut its full-year global growth forecast to 825,000 bpd.
Brent and WTI have fallen more than 20 percent from their January peak because of the coronavirus outbreak.
“All of the fundamentals are basically negative and even equities are lower and crude oil on the other hand continues to rip higher,” said Bob Yawger, director of futures at Mizuho Americas in New York.
“You can argue that maybe those demand numbers aren’t as bad as the market thought they could be,” he noted.