Oil steady as Asian states seek to offset coronavirus hit to economies

Oil extraction. (File photo: AP)

Oil steadied near $57 a barrel in London as China and other Asian states promised economic stimulus to offset the impact of the coronavirus, buoying the outlook for fuel demand.

Prices recovered more than 5 percent last week, the biggest gain since September, as some of the fears over how far the infection will hurt the global economy abated. China, Hong Kong and Singapore have pledged extra fiscal stimulus to counter the economic hit from the disease, with Beijing considering measures such as lowering corporate taxes.

Read: Oil prices plunge as coronavirus fears drive markets

Brent for April settlement rose 1 cent to $57.33 a barrel as of 10:39 a.m. in London on the ICE Futures Europe exchange. West Texas Intermediate crude for March delivery added 6 cents to $52.11 a barrel on the New York Mercantile Exchange, after adding 3.4 percent last week, the biggest weekly gain since December.

“Oil appears to have finally shaken off its bearish malaise,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “Investors cheered a salvo of stimulus measures from China’s central bank aimed to mitigating the economic impact.”

Read: OPEC cuts 2020 forecast for global oil demand due to coronavirus outbreak

China on Monday offered more funding to banks and cut the interest rate it charges for the money. Singapore has also promised a “strong package of budget measures” and central banks in the Philippines, Thailand and Malaysia have cut interest rates as Asian economies grapple with the virus-induced slowdown.

That’s offsetting any disappointment that OPEC and its partners have apparently dropped any plans for an emergency meeting to respond to the crisis. Russia, a pivotal member of the alliance known as OPEC+, has so far resisted a push by Saudi Arabia to launch fresh production cuts in response to the loss of demand.

Traders are now likely to focus on whether the coalition announces new cutbacks at its scheduled meeting on March 5 to 6. A technical committee representing the producers recommended earlier this month that they should reduce supply by a further 600,000 barrels a day, on top of current curbs.

Read: From China to Europe and the world: A timeline of the coronavirus outbreak

Concerns over the impact of the virus remain strong as Hubei, the Chinese province at the epicenter of the outbreak, reporting new cases and additional deaths. Global oil demand is expected to decline this quarter for the first time in more than a decade, according to the International Energy Agency. Goldman Sachs Group Inc. slashed its 2020 crude-demand forecast almost in half and lowered its first-quarter price estimate by $10 a barrel.

SHOW MORE
Last Update: Wednesday, 20 May 2020 KSA 09:57 - GMT 06:57
Top