Oil Achieves First Weekly Gain Since January as Coronavirus Fears Continue to Abate

Meanwhile, teapot Chinese refiners are benefiting from depressed prices: File Image/PixaBay

Despite conflicting views on the current impact and future potential of China's coronavirus, traders on Friday gambled that its economic impact would be short-lived - and as a result, oil prices enjoyed their first weekly gain since early January.

Brent rose 89 cents to $57.23 per barrel, a 4.4 percent weekly gain and the first gain in six weeks; West Texas Intermediate gained 63 cents to settle at $52.05 per barrel, up 3.3 percent for the week.

Jim Ritterbusch, president of Ritterbusch and Associates, explained trading behaviour by stating in a note that "The massive liquidation process that drove prices sharply lower last month has likely been completed and is being replaced by accumulation as well as short-covering from speculators who have recently entered the market."

Presumably traders took solace in the World Health Organization on Friday noting that the big jump in China's reported cases of the virus earlier this week did not necessarily mean a wider epidemic but reflected a decision to reclassify a backlog of suspected cases.

Also, factories in China have reportedly started to reopen.

For his part, Dan Brouillette, energy secretary for the U.S., suggested that the media's fears over the virus may have been oversold: he remarked, "At this moment, while we are seeing some slight reductions in production as a result of the virus, we are not yet concerned about its ultimate impact."

He added, "We have to put together very, very tough measures to contain the virus and if we do that effectively then I think you'll see the markets bounce back and you'll see the economies continue to grow."

Still, the overall consensus remains that demand has been severely impacted: Daniel Yergin, vice chairman at IHS Markit, said, "In February, Chinese oil demand was more than 20 percent lower than it was a year ago, and world oil demand is certainly going to be much less than anticipated; we think the growth is going to be lower than other people think, and I think it also continues into other commodities."

However, at least one group is benefiting from the commodity slump: teapot (non state-owned) refiners in China are reportedly taking advantage of the drop in crude prices to buy cheaply: according to traders, Luqing snapped up as many as seven cargoes from Russia, Angola, and Gabon for March and April, while Sinochem Hongrun bought a shipment from Gabon, and Huifeng was also looking for spot cargoes