Oil hovers near $50 on signs OPEC+ virus action not imminent

Crude has tumbled over the past few weeks as the virus wreaked havoc on the economy of the world’s biggest oil importer, China

Oil hovered around $50 a barrel on signs an extraordinary OPEC+ meeting to decide on further production cuts to deal with the demand hit from the coronavirus is looking less likely.

Ministers from the group and its allies are unlikely to hold an early meeting this month, while one planned for March will go ahead, Azerbaijan Energy minister Parviz Shahbazov told the RIA Novosti newswire. Russia has been resisting Saudi Arabian efforts to reduce output after OPEC+ technical experts recommended an additional cut of 600,000 barrels a day through June.

Crude has tumbled over the past few weeks as the virus wreaked havoc on the economy of the world’s biggest oil importer, with Chinese refineries cutting the amount of crude they’re processing by around 15 per cent. Prices could come under further pressure if talks aimed at ending the conflict in Libya, where a blockade of ports has pushed production to the lowest level since 2011, lead to a restoration of output.

Should OPEC fail to reach an agreement to cut supply, there could be additional downside to prices, Stephen Innes, Asia Pacific market strategist at AxiCorp, said in a note. A drop in US drilling activity will be required to make a sufficient dent in global oil supplies, he said.

Brent for April delivery rose 0.1 per cent to $54.54 a barrel on the London-based ICE Futures Europe exchange after losing 0.8 per cent Friday. The global crude benchmark traded at a $3.99 premium to WTI for the same month.

Oil short-selling has more than doubled in just two weeks as the coronavirus battered the demand outlook. Hedge funds boosted bearish wagers against WTI crude by 41 per cent in the week ended Feb. 4, following a 52 per cent surge a week earlier.

OPEC may extend its current production cuts through the end of 2020 in response to the slumping demand, Algerian Energy minister Mohamed Arkab said Saturday. The group will need to reduce output by an additional 500,000 barrels a day to bring the market back toward balance, Sanford C. Bernstein & Co. said in a note released Monday.

Libya’s battered economy took centre stage at United Nations-backed talks on ending the conflict in Cairo. The two-day meeting that started Sunday is being closely watched for an sign of a deal that could restore over 1 million barrels a day of output to global oil markets.

Other oil-market news

* Belarusian refineries will buy Russian oil at global-market prices, first deputy PM Dmitry Krutoy told local newswire Belta, citing agreements reached by the countries’ presidents.

* Brazil’s Petrobras is taking measures for the immediate hiring of people and services, “on an emergency basis, to ensure operational continuity in its units during the strike,” state-owned oil company said in statement on its website.

* Crude futures fell 1 per cent to 400.7 yuan a barrel on the Shanghai International Energy Exchange after dropping 9.5 per cent last week.