Oil prices clawed back ground on Tuesday, rising 1 per cent after the previous session’s slump, amid hopes for new production curbs by OPEC and its allies to offset any drop in future fuel demand that might be triggered by China’s coronavirus outbreak.
Brent crude was at $54.93 a barrel by 0615 GMT, up 48 cents, or nearly 0.9 per cent, while U.S. West Texas Intermediate (WTI) crude was up 57 cents, or over 1 per cent, at $50.68 a barrel.
Despite Tuesday’s gains, an extended slide over the last two weeks on concern over the global economic impact of the coronavirus means prices are still close to 20 per cent lower than this year’s peak on Jan. 8. Monday’s drop left crude prices at their lowest in more than a year.
People familiar with the matter told Reuters on Monday that the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, were considering cutting crude output by a further 500,000 barrels per day (bpd) due to the impact on demand from the coronavirus.
“A some half-a-million barrels (per day) cut is expected but we won’t rule out an even deeper cut should the situation worsen,” said Margaret Yang, analyst at CMC Markets. “This expectation boosted oil trading today.”
Despite the return to calmer trading, mirroring other financial markets on Tuesday, Goldman Sachs warned that while it sees oil producers responding to the situation by cutting supply, the coronavirus outbreak’s impact on demand is likely to keep volatility in spot prices elevated.
The coronavirus has now claimed more than 420 lives in China and resulted in deaths in the Philippines and Hong Kong.