Oil Price Fundamental Daily Forecast – Stable as OPEC+ Continues to Downplay Demand ConcernsWTI and Brent crude oil are now trading below levels seen in December when OPEC and its allies announced an increase and extension of production cuts.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Tuesday as traders assess the latest news on the coronavirus crisis. The markets are trading inside yesterday’s trading range, which suggests the worst of the selling frenzy may be over. This chart pattern often indicates investor indecision or a transition period. Perhaps traders are beginning to transition from bearish mode to profit-taking mode.
Oil investors are concerned that travel advisories, other restrictions and any sizable impact on growth in China and elsewhere will dampen demand for crude and related products against a backdrop of plentiful supply.
Concerns the coronavirus outbreak could hinder the global economy persist, but they seem to be downplayed on Tuesday. Additionally, reactions to the spreading virus had been very different across markets and the decline in oil prices suggested a slowdown of economic activity in China.
Japan, one of the world’s top oil buyers, warned about the risks to its economy from the virus.
Asia Jet Fuel Demand Slumps as Airlines Cancel Flights after Virus Outbreak
Asian jet fuel demand is taking a beating from an outbreak of a flu-like virus in China that has led airlines to cancel scores of flights during the peak Lunar New Year travel season, according to Reuters.
Jet fuel prices have dropped and refiners’ profits for the product have slumped to the lowest in more than 2-1/2 years, while industry analysts are cutting their 2020 forecasts for jet fuel and overall oil demand.
Jet fuel demand over the past five years has been a bright spot for global oil demand growth, accounting for some 15% of Chinese demand growth, the analysts said.
OPEC+ Could Make Changes in Response to Demand
WTI and Brent crude oil are now trading below levels seen in December when OPEC and its allies announced an increase and extension of production cuts. In response to this price action, OPEC+, led by Saudi Arabia and Russia said on Monday the group could respond to any changes in demand.
In the meantime, they continue to downplay demand concerns resulting from the virus outbreak. OPEC president Mohamed Arkab said on Monday he expects an outbreak of coronavirus in China to have little impact on the global oil market for now, but added that producers were ready to react to any new developments.
“The impact on the prospects for the world oil demand would be low,” Arkab, who is also Algeria’s energy minister, said in a statement carried on the country’s state news agency APS.
“The organization (OPEC) is closely monitoring the development of the oil market in conjunction with the development of the recent coronavirus epidemic.”