Oil prices perked up overnight after rumours emerged out of China that a cure for the novel coronavirus may be nigh.
Rumours the WHO promptly quashed. But never mind…
After trading US$49.67 per barrel yesterday, WTI bounced back to US$51.21 this morning. Brent also added a bit more than US$1 per barrel on hopes global demand won’t crater under the strains of a pandemic.
While we can all hope, that remains to be seen. Bloomberg estimates China’s oil demand has already plummeted 20% as factories shut their doors under sweeping quarantines.
And the virus’ impact goes well beyond China.
From the AFR :
‘A slowdown in the global economy resulting from the outbreak is expected to reduce 2020 worldwide oil demand growth by 300,000-500,000 barrels per day (bpd), roughly 0.5 per cent of total demand, BP’s chief financial officer Brian Gilvary said on Tuesday.’
You can see the impact on crude prices below:
Little surprise then that OPEC+ is huddled in Vienna in yet another effort to prop up oil prices by cutting supply.
But that meeting doesn’t appear to be going according to Saudi Arabia’s script. The Saudis are intent on doing whatever it takes — or whatever they can — to keep crude prices from tanking. But Russia, the ‘plus’ member, isn’t eager to play along this time around.
The cartel’s two days of scheduled talks have now entered a third day. It seems Russia is reluctant to cut more output than already agreed to in December. An agreement that ends this March.
To add to OPEC’s woes, Reuters reports that US crude inventories climbed 3.4 million barrels in the last week of January, again beating analyst forecasts.
And let’s not forget Venezuela.
If Trump manages to help oust sitting President Nicolás Maduro in favour of opposition leader Juan Guaido, he’ll lift the embargo he placed on the oil rich nation’s crude exports last year.
It would also open the door for the big international oil companies to invest in Venezuela’s notoriously beleaguered oil fields.
That will spell more bad news for OPEC and oil bulls. But it could prove a boon for companies like Chevron, Exxon or BP.
PS: It’s not just oil prices getting squashed. Iron ore is suffering as well. Download your free report to learn about the earning’s crisis facing Australia’s iron ore stocks in 2020…and the stocks you might want to own instead.