Oil steadies above $56 as supply constraints counter virus fears

Oil steadied above $56 a barrel on Tuesday after two days of declines as OPEC output cuts and Libyan supply losses balanced concerns about the spread of the coronavirus and its impact on oil demand.

Crude fell almost 4% on Monday, with other commodities also posting losses while U.S. and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic. Brent crude rose 5 cents to $56.35 a barrel by 0952 GMT. U.S. West Texas Intermediate crude was down 14 cents at $51.29.

Concern that the virus will spread and curb economic growth and oil demand has pushed down Brent crude by almost $10 a barrel this year despite the involuntary shutdown of most of Libya’s output as well as a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Prices received further support as lawmakers based in areas of eastern Libya controlled by military commander Khalifa Haftar on Monday said that they would not participate for now in peace talks with politicians allied to the internationally recognized government.

However, oil could come under more pressure from the latest round of U.S. supply reports. Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 2130 GMT. Potential support for the market could also come from OPEC and allies including Russia, which are considering whether to curb output further to offset slowing demand.

The producers, known as OPEC+, have been implementing an existing deal to cut output by 1.7 million barrels per day (bpd) since Jan. 1. An OPEC+ committee this month recommended that the group deepen its cuts by 600,000 bpd. Saudi Arabia’s energy minister on Tuesday said that OPEC+ should not be complacent about the coronavirus. Russia, key to any deal, has yet to announce its position on further curbs.

Oil steadies above $56 as supply constraints counter virus fears, Reuters, Feb 25