By Barani Krishnan
Investing.com – Buying by small Chinese refineries, bets that Russia will submit to OPEC and optimism that global oil demand won’t totally cave on the virus outbreak have combined to give crude its first weekly gain in six.
London’s Brent crude rose more than 5% on the week while New York-traded West Texas Texas Intermediate showed a gain of over 3% after both rose four days in a row.
Brent, the global benchmark for crude, settled at $57.32 per barrel, up 98 cents, or 1.7%. For the week, it rose 5.2%.
WTI, the U.S. crude benchmark, settled at $52.05, up 63 cents, or 1.2%. It rose 3.4% on the week.
Friday’s gains came amid reports that China’s smaller, independent refineries – known as teapots – were back to buying some crude amid the perceived crash in Chinese energy consumption from the Covid-19 outbreak.
Among the independent refiners, Shouguang Luqing Petrochemical Co. snapped up as many as seven cargoes from Russia, Angola and Gabon for March and April, while Sinochem Hongrun Petrochemical Co. bought a shipment from Gabon, Bloomberg reported.
“While crude run rates continue to drop in China with teapot rates under 50%, it makes me wonder if the refiners there are just catching up on their buying or getting long,” said Scott Shelton, energy futures broker at ICAP in Durham, N.C.
Also propping the market was speculation that Russia will agree in the end to contribute to OPEC’s proposed cut of 600,000 barrels per day or more to lift prices. President Vladimir Putin has kept the market guessing for a week now on how he will decide on the OPEC plan amid resistance from Russian industry, which argues that the cuts by Moscow will result in lost market share that will go to U.S. producers
“We see this as largely in keeping with past practice and that Putin will once again overrule his energy executives at the 11th hour and sign on the dotted line when the ministers meet on March 5 — though this public hand-wringing may be effectively deployed in the negotiations to reduce Russia’s overall output obligations,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note.
There was also debate on whether global demand for energy may still survive the worst from the epidemic that has killed nearly 1,400 people and infected almost 64,500, mostly in China.
The debate has been fueled by differences in the impact on global demand from the Covid-19 projected by the International Energy Agency, the U.S. Energy Information Administration and OPEC. The disparity in their numbers shows that none of the three has a definitive read on the impact, a situation taken positively by oil bulls.