Oil resumed declines as the biggest jump in U.S. crude stockpiles in almost three months added to concern over demand in a market already grappling with China’s spreading coronavirus.
Source: Houston Chronicle
Futures lost as much as 2% in New York, trading near the three-month low just above $52 a barrel reached earlier this week. U.S. inventories rose by 3.5 million barrels last week, fanning concerns that global markets soon face a renewed supply glut. Airlines across the world suspended flights to China as the death toll from the virus reached 170, with the World Health Organization meeting to consider issuing a global alarm.
Analysts are cutting their forecasts for Chinese crude consumption due to the virus, with jet fuel demand most affected. Sanford C. Bernstein & Co. reduced its estimate for oil demand growth in the nation this year to 100,000 barrels a day from 350,000. Morgan Stanley said consumption growth could take a 75,000 barrel-a-day hit if the outbreak continues to escalate for three to four months.
“Oil prices may struggle to find sustained support until the situation is more stable,” said Martijn Rats, global oil strategist at Morgan Stanley.
The impact of the potential demand hit is being heightened as the market is awash with crude, particularly from countries outside OPEC. The cartel is considering pushing forward a meeting initially scheduled for March, according to Algeria’s energy minister, amid the price slump.
West Texas Intermediate crude for March delivery fell $1.01 to $52.32 a barrel on the New York Mercantile Exchange as of 11:12 a.m. in London. Brent for March settlement declined 1.2% to $58.55 a barrel on the London-based ICE Futures Europe exchange after rising 0.5% in the previous session.
The increase in U.S. crude stockpiles was the largest since the week ending Nov. 1, according to Energy Information Administration data. Analysts surveyed by Bloomberg had forecast inventories to grow by 1.29 million barrels.
Crude spiked briefly yesterday after an attempted attack on Saudi Aramco’s Jazan plant by Yemen’s Houthi rebels, but the rally soon faded. WTI is down 14% this month.
“Houthi drone launches into the Jazan region are a dime a dozen, and the refinery located in the region is not of critical importance,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.
