Oil prices saw the first weekly gain in six weeks for the week ending Feb. 14 with the price of West Texas Intermediate (WTI) for March delivery up 3.44 percent and Brent crude oil for April delivery up 5.23 percent.
Although both benchmarks finished the week with four consecutive sessions of gains from Tuesday to Friday, the longest streak of oil price gains so far this year, WTI and Brent crude decreased by 14.76 percent and 13.15 percent, respectively, this year.
WTI closed the week at 52.05 U.S. dollars a barrel on the New York Mercantile Exchange, climbing to fresh two-week highs above the 52 dollars level, while Brent crude finished the week at 57.32 dollars a barrel on the London ICE Futures Exchange.
Oil prices bounced back amid easing concerns over the impact of the coronavirus outbreak on the global energy demand. In the meantime, the prices have also drawn some support from signals that the Organization of Petroleum Exporting Countries and its partners (OPEC+) may intervene to shore up the market.
U.S. Energy Secretary Dan Brouillette has repeatedly downplayed the impact of China’s coronavirus outbreak on global energy markets. He believed that China is “taking aggressive steps to control a potential outbreak.”
He reiterated his position shortly after both OPEC and the International Energy Agency (IEA) dramatically lowered oil demand growth forecasts this year.
OPEC released its monthly report on Wednesday, saying its expectation for crude demand growth in 2020 would be 990,000 barrels per day, down 230,000 barrels per day from its previous forecast.
The OPEC+ Joint Technical Committee last week recommended that the OPEC and its allies, including Russia and nine other countries, cut production by an additional 600,000 barrels per day through the second quarter to support prices.
The current output cut at 1.7 million barrels per day observed by the OPEC+ will last through March. OPEC+ ministers are scheduled to meet on March 5-6 in Vienna to discuss measures to support crude oil prices.
Saudi Arabia has been leading the push for more production curbs, while Russia is proceeding with caution. Russian oil giant Gazprom Neft’s CEO Alexander Dyukov said that Russian oil producers favor extending current oil production cuts rather than any deeper cuts.
The prospect of further output reduction by OPEC+ at their next meeting has fueled investors’ optimism. The oil prices extended gains even after the U.S. Energy Information Administration (EIA) reported a more than expected build of crude oil inventories on Wednesday.
According to EIA’s Weekly Petroleum Status Report, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 7.459 million barrels in the week ending Feb. 7, more than the market expected growth of 2.987 million barrels, implying weaker demand and bearish for crude prices.
Meanwhile, the U.S. Dollar Index extended gains and was holding above the 99.00 level, closing the week at its highest since October 2019. Analysts expected the index will challenge the 99.20 level next week. A higher index makes the U.S.-dollar-sensitive crude oil more expensive for foreign buyers.
For the upcoming weeks, the market will watch closely the impact of the coronavirus on oil markets and signs of a decision on output cuts by OPEC and its allies.
According to EIA, the crude oil prices will run under pressure in 2020. In its February Short-Term Energy Outlook, EIA forecast global oil supply to continue to outpace demand this year.
Thanks to the tightening situation of global oil market demand fundamentals, EIA forecast Brent crude oil spot prices would average 61 U.S. dollars per barrel in 2020, compared with 65 dollars per barrel projected a month ago.
EIA expected Brent prices to average 58 dollars per barrel during the first half of the year and 64 dollars per barrel during the second half of the year.