After several consecutive days of gains, oil prices slumped by more than 2 percent early on Tuesday, as the coronavirus continues to weigh on sentiment and Russia continues to stall an OPEC+ decision to counter the virus outbreak’s impact on oil demand and markets.
At 8:59 a.m. EST on Tuesday, WTI Crude was down 2.06 percent at $50.97, while Brent Crude was plunging by 2.24 percent at $56.38. Oil prices were tracking losses in equity markets, with Dow futures down early on Tuesday, pointing to a drop of 123 points at market open, after Apple warned it would miss its revenues target this quarter because the coronavirus outbreak has hurt Chinese demand and production for worldwide sales of its iPhone.
The price of oil was also under pressure from the continued stalling from Russia, which has been avoiding for weeks now a direct reply to a proposal for deeper production cuts to counter the demand loss from the coronavirus.
Russia has taken time to review the proposal of the OPEC+ group joint technical committee (JTC) to extend the cuts as-is until the end of 2020 and to deepen those cuts in the second quarter in response to the fact that the coronavirus “has had a negative impact on oil demand and oil markets.” Related: Goldman Slashes Oil Price Forecast By $10
Russia’s Energy Minister Alexander Novak continues to discuss the OPEC+ deal with his colleagues in the production group, Vladimir Putin’s spokesman Dmitry Peskov told reporters in Moscow today.
Novak continues to discuss the situation with his colleagues at the OPEC+ alliance and there is nothing more to add at this point, Peskov added.
Analysts believe that OPEC+ would need to act in response to the slump in oil demand to prevent a glut and support oil prices.
“Prior to the coronavirus outbreak we were of the view that OPEC+ would need to extend its output cut deal through until mid-year,” Warren Patterson, Head of Commodities Strategy at ING, said on Tuesday.
“However, given the demand impact from the coronavirus, we believe that current cuts of 1.7MMbbls/d need to be extended, along with continued over compliance from Saudi Arabia. These stronger-than-needed cuts in the second quarter would help offset stock builds over the first quarter,” ING’s Patterson added.
By Tsvetana Paraskova for Oilprice.com
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