The Daily Dose

-German economy is standing still

-Chinese economic cold is spreading, though mixed signals are abundant

Crude oil prices were on the rise in early morning trading and could be on pace for at least a 4% gain on the week if the rally holds. The trend has been supported largely by the effect, or lack thereof, of the coronavirus, with some officials downplaying the economic impact. Most other metrics, however, were bearish, suggesting a disconnect in the sentiment on short-term and long-term economic trends.

Brent crude oil was up 1.5% as of 8 a.m. EST to $57.19 per barrel. Markets opened in the red on Thursday, but ended up despite IEA warnings on demand. Bearish factors abound, meanwhile, with European economies showing contraction.

The IEA in its latest monthly report downgraded its growth forecasts, citing the demand destruction emanating from the impact on the Chinese economy stemming from the coronavirus. We may be seeing some spillover from the outbreak, with German megalith BASF diverting some products away from the Chinese market and Fiat Chrysler suspending operations in Serbia because of a lack of parts from Chinese manufacturers. The more direct impact may be on the Chinese economy, with the US energy secretary telling Reuters the coronavirus was unlikely to be a major market issue.

The mood on the coronavirus is fluid, driving much of the volatility in recent sessions. Data services provider Kayrros finds Chinese oil demand in January was at the lowest level since May. Activity in the refining sector has yet to take the full hit, according to its analysis. Refinitiv, meanwhile, shows crude oil building up offshore China.

There is, meanwhile, no shortage of signs of a protracted global slowdown, with or without the coronavirus. Wood Mackenzie suggests there may be some general stability overall, but there are headwinds blowing in from the margins. Global liquids demand “seems healthy,” though “underlying growth will remain relatively modest.” Germany, a bedrock of the European economy, reported stagnant growth in the fourth quarter. The broader European economy showed growth of 0.9% in the fourth quarter, coming in slower than expected.

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