Oil prices rise as producers set to seal agreement on deeper cuts
Oils prices on Wednesday rose as major producers moved closer to an agreement to enact deeper outputs cuts aimed at offsetting the slump in demand caused by Coronavirus outbreak.
Brent crude gained 1.8 to trade at $52.83 per barrel, while U.S West Texas Intermediate gained 1.8 per cent to trade at $48.00 per barrel. Industry traders said that Saudi Arabia and other OPEC members are seeking to persuade Russia on Wednesday to join them in large additional oil output cuts to prop up prices which have tumbled because of the Coronavirus outbreak.
Analysts averred that, with demand uncertainties having already dragged Brent futures about 19 per cent lower since the start of the year, oil’s upside appears significantly capped amid persistent concerns over the Coronavirus outbreak.
The Daily Times had earlier reported that, a technical panel of several representatives from OPEC states, Russia and other producers had recommended cutting output by as much as an extra 1 million barrels per day (bpd) during the second quarter only.
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Analysts said, what offered relatively more support to oil yesterday was that the OPEC+ Joint Technical Committee recommendation to OPEC+ to increase the level of additional cuts, which also appears to be providing some strength to the oil market.
Goldman Sachs has again cut its Brent price forecast to $45 a barrel in April while expecting Brent gradually recovering to $60 a barrel by the year-end.
The bank said while an output cut by OPEC “will help normalize oil demand and inventories later this year, they can’t prevent an already started large oil inventory accumulation.”
Morgan Stanley also cut its second-quarter 2020 Brent price forecast to $55 per barrel and its WTI outlook to $50 on expectations that China’s 2020 oil demand growth would be close to zero and that demand elsewhere may weaken because of the virus.
The U.S. Federal Reserve cut interest rates on Tuesday in a bid to shield the world’s largest economy from the impact of the coronavirus but the decision offered only limited support for crude.
