By Barani Krishnan
Investing.com - Oil settled little changed on Tuesday, but its earlier slide on the day was still proof of a market vulnerable to sharper selling on demand fears related to the Covid-19 outbreak.
Crude prices tumbled as much as 2% initially as U.S. markets reopened from the President’s Day holiday amid Apple’s warning that the outbreak will prevent it from meeting its Q2 revenue forecasts due to production and sales slides in China.
But by settlement, oil was back at around Monday’s settlement levels in Europe.
Brent, the global benchmark for crude, settled up 8 cents at $57.75 per barrel.
WTI, the U.S. crude benchmark, settled unchanged at $52.05.
Although the market rebounded by the close, the early slide was still a warning to oil bulls who thought prices had found a bottom after last week’s rebound of more than 5% in Brent and more than 3% in WTI.
Apple’s revenue warning pulled global markets lower as China reported chilling new Covid-19 statistics, which showed the number of infections at 72,436 as of Tuesday morning, up nearly 1,888 from a day before, and the death toll at 1,868, up 98 from 1,770.
Oil bulls are fervently hoping Russia will agree to production cuts of some 600,000 barrels per day proposed by Saudi Arabia and its other allies in OPEC.
Oil ministers in the alliance, known as OPEC+, are to meet in Vienna on March 5-6 to discuss next steps on rescuing the market from the impact of Covid-19.
Yet, as Olivier Jakob at the Petromax oil risk consultancy in Zug, Switzerland, pointed out, Russia may have good reason for not joining the OPEC cuts because data shows Saudi crude exports haven’t fallen much despite the widely-feared crash in Chinese demand for oil.
“We can understand Russia’s hesitation when looking at the latest official numbers for Saudi Arabia published,” Jakob said in a note.
“Saudi Arabia reports that its production has dropped 1.05 million barrels per day versus a year ago, but its crude oil exports are down only 0.3 million bpd year on year. Saudi Arabia is reporting a big drop in production but kept most of its market share in international crude oil markets by running less crude oil in its refineries and drawing down on stocks.”
Oil industry executives in Russia have advised President Vladimir Putin to resist cooperating with OPEC on the cuts, arguing that any reduction of crude exports by Moscow will benefit competitors, especially U.S. drillers who aren’t a part of OPEC.