Meanwhile, signs indicate that Russia is close to participating in output cuts: File Image/PixaBay
Maybe impact on demand won't be so bad after all: that was the sentiment of crude traders on Wednesday after China reported the lowest number of new coronavirus cases since the end of January; and that, along with signs that the Organization of the Petroleum Exporting Countries (OPEC) will deepen and extend its output cuts resulted in oil prices jumping by over 3 percent.
West Texas Intermediate on Wednesday gained 2.46 percent, or $1.23, to settle at $51.17 per barrel, while Brent rallied 3.3 percent, or $1.78, to settle at $55.79 per barrel.
The gains came despite the U.S. Energy Information Administration reporting a 7.5 million barrel inventory build for the week ending February 7, compared with analytical expectations of a 3.2 million barrel build.
Helima Croft, RBC Capital Markets
We are getting close to Russia signing off on the OPEC+ deeper cut
China's National Health Commission reported 2,015 new cases of the coronavirus and 97 additional deaths, bringing the total numbers to 44,653 confirmed cases and 1,113 deaths - which dovetails with widespread calculation that the outbreak will soon peak and then begin declining within a few months.
Meanwhile, OPEC in its latest monthly report forecast a 2020 daily oil demand growth of 990,000 barrels per day (bpd), 230,000 bpd below prior forecasts; analysts regarded this as a clear sign the cartel could undertake additional output cuts.
The report stated, "Clearly, the ongoing developments in China require continuous monitoring and assessment."
Helima Croft, global head of commodity strategy for RBC Capital Markets, remarked that signs indicate "we are getting close to Russia signing off on the OPEC+ deeper cut."
Indeed, Russia seems amenable to combating that coronavirus impact in that Ravil Maganov, executive vice president of Lukoil, told media on Wednesday that most Russian oil companies want oil output cuts to remain for one more quarter.
However, John Kolovos, head of technical strategy at Macro Risk Advisors, warned Bloomberg Television viewers that oil will remain in a bear market for the near future because the coronavirus isn't fully priced into the market and the market is still experiencing a long-term downward cyclical trend.