By Peter Nurse
Investing.com – Oil prices edged higher Thursday, bouncing after recent hefty losses, despite the International Energy Agency laying bare the extent of the damage to global crude demand caused by the outbreak of the coronavirus in China.
By 10:10 AM ET (1510 GMT), futures were 0.8% higher at $51.59 a barrel, while futures in U.K. , the global crude benchmark, were up 1% at $56.53 a barrel.
The oil market has posted five losing weeks in a row, and this week had been looking like extending the run. Combined losses over this period leave the oil complex in bear-market territory, creating plenty of room for a bounce.
Adding to the positive tone Thursday is the uncertainty surrounding the timeline for the restarting of the Exxon (NYSE:) refinery in Baton Rouge, La. after Wednesday’s fire.
But it’s difficult to see much further upside for oil prices unless there are significant cuts to producer levels given the hit to demand caused by the outbreak of Covid-19 in China.
Global oil demand is now set to see its first quarterly contraction in more than a decade, the International Energy Agency said, estimating a drop of 435,000 barrels a day during the first three months of the year. It had previously expected world fuel consumption to grow by 800,000 barrels a day compared with a year earlier.
The expected decline in demand prompted the agency to cut its 2020 growth forecast by 365,000 bpd to 825,000 barrels a day, the lowest since 2011.
Further evidence of weakening consumption came from the U.S. reporting the biggest weekly jump in crude stockpiles in three months.
So, eyes are firmly fixed on the globe’s major producers to see whether they can agree to limit production once more.
Technical experts from the Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+, recommended a further cut of 600,000 barrels a day in early February. However, Russia, a key producer, has so far resisted the initiative, asking for time to study the proposal.
Russia will settle its position in a “timely” way, a Kremlin spokesman said on Thursday. This suggests a decision won’t be arriving any time soon.
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