By Sharon Cho and Alex Longley
Oil use may not grow at all this year for only the fourth time in almost four decades, according to a growing minority of traders, investors and analysts. While economic stimulus in China and elsewhere may boost consumption in the second half, it’s unlikely to completely make up for the current hit to demand. Against this backdrop, OPEC+ meets on Thursday and Friday to decide on policy.
“The surge in oil prices today is driven by hopes that the OPEC alliance will deepen output cuts,” Michael Poulsen, an analyst at Global Risk Management, wrote in a report. “Hopes in the financial markets are now that the world’s central banks could spur some relief in the economies with economic stimulus.”
West Texas Intermediate futures for April delivery rose 1.6% to $45.47 a barrel on the New York Mercantile Exchange as of 10:30 a.m. London time. Brent futures for May delivery climbed 1.8% to $50.56 a barrel on the ICE Futures Europe exchange, after losing as much as 2.6% earlier.
Another Chinese purchasing managers’ index fell to 40.3 in February from 51.1 in January, according to figures released Monday. That came after the manufacturing PMI reading over the weekend of 35.7, which missed analyst expectations for 45. Worldwide deaths from the coronavirus have now surpassed 3,000, with South Korea, Iran and Italy emerging as hotspots.
Putin said the OPEC+ mechanism “has already established itself as an effective tool in ensuring long-term stability in global energy markets.” Still, Russia’s oil exports to Asia were almost unscathed in February amid the virus outbreak, potentially limiting the nation’s motivation to back deeper production cuts.
Nevertheless, “Russia isn’t as price-agnostic as it endeavors to seem,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note. Since current prices do not work for most of the OPEC+ group, “Saudi Arabia will likely be able to rally the rest of the producers for a cut of at least 1 million barrels a day.”
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