Oil prices erased Asian-trade-hours gains and lost 1 percent early on Tuesday in search of direction as fears of additional demand destruction amid the coronavirus outbreak continue to weigh on market sentiment.
Oil prices were seesawing early on Tuesday as market participants were chasing positions at bargain prices after Monday’s plunge, awaiting a clearer price catalyst with the API inventory report later in the day.
The market began to panic last Friday that the coronavirus outbreak reaching Europe and the Middle East would depress global economic growth and, by extension, further hurt oil demand growth.
Oil ended on Friday with a tentative price recovery, which was fueled by hopes that the Chinese outbreak may soon be contained and that the Chinese authorities would be rolling out stimulus to help the economy to recover from the outbreak-inflicted slowdown.
But over the weekend, South Korea reported a jump in infections, and Italy reported first deaths in what is so far the worst outbreak of the coronavirus outside Asia with more than 280 people infected as of early Tuesday.
“Concerns over the rising number of Covid-19 cases outside China continues to weigh on sentiment, and market participants are likely to remain cautious until there is a sign of a peak in of cases outside China,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
The fear of further oil demand loss continues to outweigh an already month-long supply outage with the blockade of key Libyan oil export terminals, which has decimated production and exports from the OPEC producer that pumped more than 1 million bpd before the blockade by forces loyal to General Khalifa Haftar.
The chairman of Libya’s National Oil Corporation (NOC), Mustafa Sanalla, called on the United States over the weekend to step in and help lift the blockade. As of Sunday, Libya was producing just 122,430 bpd, NOC said on Monday, confirming a huge slump in production as a result of the blockade of ports and pipelines.
OPEC’s leader Saudi Arabia tried to reassure the market on Tuesday that there isn’t a rift within the OPEC+ group and producers continue to communicate about how the group should best handle the coronavirus-related demand loss ahead of the March 5-6 meeting in Vienna.
“I’m confident of our partnership as OPEC+, I’m confident that everyone in the OPEC+ is a responsible and responsive producer,” Saudi Energy Minister Prince Abdulaziz bin Salman said.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Two Abundant Elements That Could Create A Superbattery
- This Country Could Soon Become The Biggest Buyer Of U.S. Oil
- Oil Prices Tumble 4% As Coronavirus Demand Shock Spreads