Oil rises for a second day as OPEC+ weighs coronavirus action

The OPEC logo. (File photo: Reuters)

Oil futures rose for a second day on Thursday, boosted by potential OPEC+ action to counter oil demand loss from the coronavirus outbreak and by optimism that trade tensions between China and the US were easing.

A technical committee advising the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, has agreed to recommend a provisional additional cut in oil output of 600,000 barrels per day (bpd) as it awaits the final position of Russia on the proposal, two sources told Reuters.

If adopted at a future meeting of OPEC+, the total size of the output curb from the group would rise to 2.3 million bpd.

Brent futures rose by 18 cents to $55.46 a barrel by 1135 GMT. The contract had been negative earlier in the session. US West Texas Intermediate (WTI) futures gained 51 cents to $51.26.

“Saudi Arabia seems ready to push for a very proactive and immediate production response,” bank RBC said in a note.

China on Thursday said it would halve additional tariffs levied against 1,717 US goods last year, following the signing of a Phase 1 trade deal between the two countries.

“This makes China’s goal to increase its US purchases to $200 billion over the next two years more achievable,” JBC Energy said in a note.

Oil prices have slumped more than 20 percent since reaching their highest this year on January 8 on demand concerns caused by the virus outbreak and indications of oversupply.

Technical market indicator, the relative strength index, which measures buying and selling momentum, suggests prices have fallen too far, too fast and investors may be buying futures in response.

In the last two days, commodities, equities and other markets have been buoyed by unconfirmed reports of a possible advance in producing treatment drugs for the coronavirus that has shut down transport and limited industrial activity in China.

However, the World Health Organization has played down the reports of “breakthrough” drugs being discovered.

A further 73 people on the Chinese mainland died on Wednesday from the virus, the highest daily increase since the outbreak started, and another 3,694 new cases were reported, raising the total to 28,018.

Commodity supply chains in China have been disrupted to the extent that short-term sales of crude oil, along with liquefied natural gas, fell to nearly zero this week.

While oil prices have gained in the past two days, the front month contracts of both Brent and WTI remain in contango, a situation where longer-dated futures trade at a premium to shorter dated ones, indicating the market sees ample supply or falling demand for crude.

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Last Update: Wednesday, 20 May 2020 KSA 10:05 - GMT 07:05
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