Stock Analysis, IPO, Mutual Funds, Bonds & More

Oil prices fall on bearish demand forecasts

Brent crude lost 65 cents to $55.14 a barrel by 0930 GMT.

Last Updated: Feb 13, 2020, 03.57 PM IST
US West Texas Intermediate (WTI) was down 39 cents at $50.78.
Oil prices fell on Thursday after OPEC and IEA reports cut back demand forecasts for this year on the back of the coronavirus outbreak in China, the world's biggest oil importer.

Brent crude lost 65 cents to $55.14 a barrel by 0930 GMT while US West Texas Intermediate (WTI) was down 39 cents at $50.78.

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 Feb. 12 and that deaths climbed by a daily record of 242 to 1,310, reflecting changes to the diagnostic methodology.

Oil refiner China National Chemical Corp on Thursday said it would close a 100,000 barrel per day (bpd) plant and cut processing at two others amid falling fuel demand.

The International Energy Agency (IEA) expects oil demand in the first quarter to fall for the first time in 10 years before picking up from the second quarter. The agency cut its full-year global growth forecast to 825,000 bpd.

"(It's) worth noting that these forecasters are for now assuming a V-shape recovery in oil demand, with the bulk of the impairement concentrated in Q1, 2020," BNP Paribas analyst Harry Tchilinguirian told the Reuters Global Oil Forum. On the supply side, the Organization of Petroleum Exporting Countries (OPEC) lowered its 2020 demand forecast for its crude by 200,000 bpd, prompting expectations that the producer group and its allies, known as OPEC+, could agree further cuts when they next meet, possibly as early as this month.

Brent and WTI have fallen more than 20% from their January peak because of the disease outbreak.

Lower fuel demand expectations because of the virus have also shifted the market structure for both Brent and WTI into a contango, when prompt prices are lower than those for later dates.

The six-months spread of Brent futures contracts is at about minus 76 cents.

Reflecting a well-supplied market, US crude inventories in the week to Feb. 7 increased by a more than expected 7.5 million barrels to 442.5 million barrels, the Energy Information Administration said on Wednesday.

Also Read

Palm oil prices fall 3% on demand concerns, lower oil prices

Palm oil prices fall on low demand fears

Crude oil prices to remain choppy in the near term

Crude oil prices slump amid coronavirus chaos

Gulf markets plunge on oil price crash

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service