By Barani Krishnan
Investing.com - Oil prices managed to stay higher on Thursday as market bulls hung onto the belief that Russia and OPEC will deepen production cuts to temper any worsening demand for crude from a new spike in deaths and infections related to China’s Covid-19 epidemic.
Benchmark Brent and WTI crude futures settled up less than 1% each, staying in the green for a third-straight day despite a highly pessimistic demand outlook from the International Energy Agency, which essentially looks out for the interests of Western nations that import oil.
“The longs in the market are praying for Russian and OPEC intervention,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors in New York. “If those cuts don’t come in, then all hope may be lost as this virus doesn’t seem to be slowing in the demand destruction it’s causing to oil.”
Brent, the London-traded global benchmark for crude, settled up 42 cents, or 0.8%, at $56.34 per barrel.
New York-traded WTI, U.S. crude benchmark, settled up 25 cents, or 0.5%, at $51.38.
Both benchmarks have risen about 4% each over the past three sessions, defying even a big weekly build in U.S. crude stockpiles, which rose by 7.5 million barrels for the week ended Feb. 7 compared with expectations for an increase of 3 million barrels.
China reported a sharp spike in deaths and infections from the Covid-19 after the hardest-hit province of Hubei applied a new classification system that broadens the scope of diagnoses for the outbreak, which has spread to more than 20 countries.
The death toll in China reached 1,367, up 254 from the previous day. The number of confirmed cases jumped 15,152 to 59,804. The unusually large increases were due to the change in Hubei’s approach.
But the White House still believes that China is under-reporting the number of infections and deaths, according to published reports.
Japan reported its first death, a woman in her 80s who had been hospitalized since early February. She is the third confirmed fatality outside of mainland China, after deaths in the Philippines and Hong Kong.
The International Energy Agency, meanwhile, estimated a drop of 435,000 barrels a day during the first three months of the year. It had previously expected world fuel consumption to grow by 800,000 barrels a day compared with a year earlier.
The expected decline in demand prompted the agency to cut its 2020 growth forecast by 365,000 bpd to 825,000 barrels a day, the lowest since 2011.
Oil bulls are counting on OPEC+, which includes the original 13 member of the cartel and 10 allies led by Russia, to agree to a 600,000-barrels-per-day cut in production to offset some of the lost demand in crude. But Moscow has dragged its feet.