Select Page

Oil Snaps Rally as Investors Assess Virus Measures  | Rigzone

Oil Snaps Rally as Investors Assess Virus Measures  | Rigzone

(Bloomberg) — Oil snapped the longest run of daily gains this year as investors assessed the demand hit from the coronavirus and stimulus measures being rolled out to cushion its economic impact.

Markets are overconfident in expecting a v-shaped recovery and oil prices are likely to remain weak during the first half of the year, according to Citigroup Inc. China has pledged a raft of fiscal stimulus measures, while Singapore will boost spending to counter the slowdown in tourism and trade.

The outbreak has curbed travel and hit supply chains across the world, with Chinese refineries continuing to trim processing rates and Apple Inc. saying it won’t be able to meet its revenue guidance for the March quarter due to work slowdowns and lower smartphone demand. Brent oil rallied the past five days amid optimism the worst economic impacts had been accounted for.

“Markets are taking a view that this will be a temporary deferral of demand, rather than destruction,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “I don’t agree. I think, the destruction of demand will be significantly higher than the market is pricing at the moment.”

Brent for April settlement lost 89 cents, or 1.5%, to $56.78 on the ICE Futures Europe exchange as of 7:54 a.m. in London after closing 0.6% higher on Monday. The global benchmark crude trade at a premium of $5.12 to West Texas Intermediate for the same month.

WTI futures for March delivery traded 72 cents lower from Friday’s close at $51.33 a barrel. There was no settlement Monday due to the Presidents Day holiday in the U.S.

The supply-chain recovery in China could be problematic despite the stimulus pledge from Beijing, Citigroup analysts including Edward Morse said in a note to clients. Total Chinese product demand may drop by about 3.4 million barrels a day in February and average 1.5 million barrels per day in the first quarter.

China offered more funding to banks and cut the interest rate it charges for the money, while Singapore said it will set aside S$800 million ($575 million) in its budget to counter the outbreak, and give S$5.6 billion in support to businesses and consumers to cushion the economy.

–With assistance from James Thornhill.

To contact the reporter on this story:

Saket Sundria in Singapore at

To contact the editors responsible for this story:

Serene Cheong at

Ben Sharples, Andrew Janes

Source link

About The Author

Leave a reply

Your email address will not be published. Required fields are marked *