Oil extended its rebound above $50 a barrel as tentative signs that Asia’s coronavirus may be easing spurred speculation that the worst of crude’s sell-off could have passed.
US futures rallied 2.2% in a second daily gain, having lost about 16% during preceding month amid fears the disease would slash fuel consumption in China. The latest data from the country showed a drop in suspected infections on the mainland and the number of cases in the virus’s epicenter, Hubei province, at the lowest level this month.
“Risk sentiment is dominating the market and probably helping oil prices today,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “It seems the market thinks the worst is over, though time will tell.” West Texas Intermediate crude for March delivery rose $1.13 to $51.07 a barrel on the New York Mercantile Exchange.
It advanced 0.8% on Tuesday after closing at a 13-month low the day before. Brent for April settlement climbed 2.7% to $55.44 a barrel on the ICE Futures Europe exchange in London.
Prices have also drawn some support from signals that Organisation of Petroleum Exporting Countries (Opec) and its partners may intervene to shore up the market.
Russian Energy Minister Alexander Novak is meeting with the nation’s oil companies after technical experts from the Opec and allies proposed last week that the coalition cut production further. Russia is “studying” the recommendation that the 23-nation alliance reduce supplies by an additional 600,000 barrels a day, on top of cutbacks already in progress.
Opec said in a monthly report it slashed its estimate for demand growth in the first quarter by 440,000 barrels a day, or about a third, because of the virus’s impact.
Saudi Arabia has been leading the push for more production curbs, while Russia, whose budget is more resilient to lower oil prices, is proceeding with caution.
There are also some indications that physical crude markets have strengthened, or at least that their recent weakening has paused.
The discount on front-month Brent contracts versus the second month has narrowed to 10 cents a barrel from 33 cents at the end of last week, suggesting diminished fears of an immediate glut. Still, discounts persist for Brent contracts for most of the rest of this year, a pattern known as contango that typically reflects entrenched oversupply.
An American Petroleum Institute report showed US crude inventories rose by 6 million barrels last week. That would be the largest increase in three months if confirmed by official government data due later on Wednesday. Analysts surveyed by Bloomberg are forecasting a 3.2 million-barrel build.