Oil prices drop as OPEC+ reflect on Coronavirus action -Analysis

Analysis on Thursday said oil futures dropped despite drastic action from the non-members of Organisation of Petroleum Exporting Countries (OPEC+) group of producers to counter an expected fall in oil demand as a consequence of the coronavirus outbreak. Industry experts said that OPEC+ technical panel has recommended a provisional cut in oil output of 600,000 barrels per day (bpd), while Russia has yet to declare its position on the matter.

Brent crude was down 62 cents at $54.66 a barrel, while U.S West Texas Intermediate futures fell 14 cents to $50.61 per barrel. Analysts said, though the Joint Technical Committee (JTC) is not a decision-making body but does advise the OPEC+ group comprising (OPEC) and allies led by Russia.

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RBC stressed that Saudi Arabia seems ready to push for a very proactive and immediate production response, but there was some price support from optimism that trade tensions between China and the United States are easing.

China on Thursday said it would halve additional tariffs levied against 1,717 U.S. goods last year after the signing of a Phase 1 trade deal between the two countries.

This makes China’s goal to increase its U.S. purchases to $200 billion over the next two years more achievable,” JBC Energy averred.

Our correspondent gathered that oil prices have slumped more than 20% since reaching their highest this year on Jan. 8 on demand concerns caused by the virus outbreak and indications of oversupply.

The relative strength index, a technical market an indicator that measures buying and selling momentum, suggests prices have fallen too far, too fast and investors may be buying futures in response. Industry expert, however, revealed that, commodity supply chains in China have been disrupted to the extent that short-term sales of crude oil, along with liquefied natural gas, fell to nearly zero this week.
While oil prices have gained in the past two days, the front-month contracts of both Brent and WTI remain in contango, a situation where longer-dated futures trade at a premium to shorter-dated contracts, indicating the market sees ample supply or falling demand for crude.