Oil prices have edged up from 13-month lows as the number of new coronavirus cases slows in China, easing some concern over the potential for lengthy oil demand destruction.
The death toll surpassed 1,000 on Tuesday, though the number of new confirmed cases fell. The epidemic could peak in February and then plateau before easing, the Chinese government’s top medical adviser said about the outbreak.
Brent crude was up 85 cents, or 1.6 per cent, at $US54.12 a barrel by 1412 EST (0612 AEDT on Wednesday), having dropped on Monday to its lowest since January last year at $US53.11.
US West Texas Intermediate crude was up 41 cents, or 0.8 per cent, at $US49.98
“It is way too early to definitely state that the peak of the virus is in place but optimism is growing,” INTL FCStone said in a note.
“Prices will mildly recover in the meantime, as the virus slowly eases and OPEC members lack any actions moving forward thus far on steps to support prices,” it said.
Investors remain wary that China’s oil demand could take a further hit if the coronavirus cannot be contained and if the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, fail to agree on further steps to support prices.
“The lack of any co-ordinated action by OPEC+ means that oversupply concerns are likely to retain the upper hand,” Commerzbank analyst Eugen Weinberg said.
The virus is already denting demand in the world’s second-largest oil consumer. Chinese state refiners plan to cut as much as 940,000 barrels per day (bpd) – almost 1.0 per cent of world demand – from their crude processing rates in February.
The US Energy Information Administration cut its global oil demand growth forecast for this year by 310,000 barrels per day (bpd) after the coronavirus outbreak.
Oil also received a boost from a rally in world equities, which resumed their climb towards record highs on Tuesday on hopes the virus is peaking.
OPEC and allies including Russia are restraining output by 1.7 million bpd in 2020 to support the market and have been considering further curbs.
An OPEC+ advisory panel proposed an additional cut of 600,000 bpd last week but Russia has delayed delivering its official stance, frustrating some OPEC members.
In a development that could add to downward pressure on prices, US crude inventories are expected to rise for a third straight week, by 2.9 million barrels in the week ended on February 7, a Reuters poll showed.
US supply reports are due later on Tuesday and on Wednesday.