Oil rises on short-covering despite growing fears over coronavirus
Saudi Arabia’s energy minister said yesterday he was confident that OPEC and its partners would respond responsibly to the spread of the coronavirus
Crude prices edged up on Wednesday as investors covered short positions after three sessions of losses, even as fears deepened that the rapid spread of the coronavirus will lead to a global pandemic.
Brent crude rose 42 cents, or 0.8%, to $55.37 a barrel by 0154 GMT, while US West Texas Intermediate crude gained 43 cents, or 0.9%, to $50.33 a barrel. Still, both benchmarks are down nearly 7% since last Thursday's close.
Fears of a pandemic escalated after the coronavirus spread to more countries, while Iran's virus death toll rose to 16, the highest outside China, and infections worsened in South Korea and Italy.
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In the United States, the Centers for Disease Control and Prevention said Americans should prepare for possible community spread of the virus.
"Investors unwound short positions after WTI dipped below a key support level of $50, as they have done a few times earlier this month," said Hideshi Matsunaga, analyst at Sunward Trading.
"The reduction in Libya's output and expectations for additional production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ are also lending support," he said.
Oil output in Libya has fallen sharply since January 18 because of a blockade of ports and oil fields by groups loyal to eastern-based commander Khalifa Haftar.
OPEC and its allies including Russia, a group known as OPEC+, are due to meet in Vienna over March 5-6.
Saudi Arabia's energy minister said on Tuesday he was confident that OPEC and its partners would respond responsibly to the spread of the coronavirus.
Still, lingering worries that the rapidly spreading coronavirus will dent the global economy and oil demand are weighing on investor sentiment.
The International Energy Agency's (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.
US crude inventories are expected to rise for a fifth week running. The American Petroleum Institute (API) said late Tuesday that crude stockpiles rose 1.3 million barrels last week. Government data due at 10:30am EST on Wednesday was expected to show a 2 million-barrel rise, according to a Reuters poll.
Meanwhile, the United States is preparing to impose more sanctions on Venezuela's oil sector, President Donald Trump said on Tuesday, in an attempt to choke financing to President Nicolas Maduro's government.
