Oil Stumbles on Fears of Virus Intensifying Beyond China
(Bloomberg) -- Oil fell as the coronavirus outbreak accelerated beyond China, intensifying concerns about the infection’s economic fallout.
Futures fell 0.9% in New York on Friday. China revised how it calculates infection totals for the third time this month, raising questions about data reliability and confirming the virus’s growing reach. Meanwhile, a key IHS Markit gauge of factories and service providers in the world’s largest economy dropped for the first time in seven years, sparking sell-offs in government bonds and equities.
“The market is seeing a broad risk-off move,” said Jan Stuart, global energy economist at Cornerstone Macro. “Just when the outbreak was beginning to turn, the new cases are making investors wonder if we have more to worry about. There was no move in the structure however, the backwardation in Brent held. Oil followed the move down as investors took money off the table.”
Oil has fallen more than 12% this year as China’s viral outbreak crippled industrial activity and transportation at a time when energy supplies already were abundant. The World Health Organization said if countries don’t respond strongly now, the spread outside China may become a wider threat.
Still, crude posted a second consecutive weekly gain, supported by supply disruptions in Venezuela and Libya.
West Texas Intermediate for April delivery fell 50 cents to settle at $53.38 a barrel on the New York Mercantile Exchange, ending the week 2.6% higher.
Brent for April settlement declined 81 cents to settle at $58.50 on the ICE Futures Europe exchange putting its premium over WTI at $5.12. The global benchmark rose 2.1% for the week.
The Organization of Petroleum Exporting Countries and its allies will meet in March as originally scheduled after efforts by Saudi Arabia to hold an emergency meeting failed to materialize amid resistance from Russia. Saudi Arabia’s energy minister dismissed a Dow Jones report on Friday that Riyadh was considering a break from its four-year oil production alliance with Russia. Russia has remained noncommittal to an OPEC proposal for additional production cuts.
“Saudi Arabia needs the production cuts more than Russia,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “Russia will eventually come to the table in March and participate but Saudi Arabia will likely shoulder most of burden to get them to come on board.”
Other oil-market stories:
- Gasoline futures fell 1.1% to settle at $1.6506 a gallon.
- Whether it’s crude oil, copper or iron ore, some important commodities for the global economy have rallied into what may prove an unprecedented demand shock.
- Chevron Corp.’s future growth prospects may be dimming after the oil explorer pumped more crude than it discovered or bought last year, eroding its portfolio of untapped fields.
- Russia and Belarus traded views on how to settle a oil dispute that has threatened to disrupt transit to Europe since the beginning of the year.
- The number of supertankers headed to China over the next three months is higher than normal.
- Operating rates at independent refineries in China’s Shandong province fell to the lowest level since September 2015, according to data from industry researcher SCI99.
--With assistance from James Thornhill, Grant Smith and Saket Sundria.
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