Crude oil under pressure at US$50 a barrelBusiness | 11 Feb 2020 10:54 am
Oil was mired around US$50 a barrel, with near-term prices low relative to later-dated contracts, as China’s coronavirus-hit demand prompted cargo deferrals and fueled concerns over a growing glut, Bloomberg reports.
The world’s largest oil traders are seeking to store crude on tankers at sea as the industry tries to deal with the oversupply that’s emerged as the coronavirus outbreak wreaked havoc on Asia’s largest economy.
Chinese energy importers are struggling to cope with swelling stockpiles, with one declaring force majeure, as travel bans and quarantines weigh on fuel demand.
Crude prices have fallen by about 10 perent since China markets closed for the Lunar New Year holidays.
The discount for prompt contracts versus later ones -- known as contango -- stayed wide in New York and London, signaling a weakening market. While OPEC+ producers are set to meet in March to consider how to deal with the plunging demand, a much-touted emergency meeting this month is looking less likely.
“Crude remains under pressure from worries over demand destruction from the coronavirus,” said Vandana Hari, founder of Vanda Insights. “Prices are likely to continue drifting lower in tandem with the progression of the epidemic.”
West Texas Intermediate crude for March added 1.3 percent to US$50.19 a barrel on the New York Mercantile Exchange at 9:53 a.m. Singapore time. It fell 1.5 percent on Monday. Brent crude for April climbed by 1.4 percent to US$54.01 a barrel on the London-based ICE Futures Europe exchange.
The global benchmark crude traded at a US$3.62 premium to WTI for the same month.
Vitol SA, Royal Dutch Shell Plc and Litasco SA are among firms asking about hiring supertankers for storage purposes as a sharp drop in Chinese demand due to the coronavirus prompts requests for cargo deferments, according to people familiar with the matter, shipbrokers and oil traders.
The Organization of Petroleum Exporting Countries is unlikely to meet in February to discuss the effect of the virus on oil markets, leaving the possibility of further production cuts up in the air.
Technical experts had earlier recommended a further supply cut of 600,000 barrels a day until June, said OPEC delegates, who asked not to be named because talks were private.