Crude oil prices continued their recovery, with early-morning movements suggesting a healthy bounce ahead of the release of key US inventory data. The rebound could be reflective of a sigh of relief given Chinese assurances on containing the coronavirus.
Brent seems to be making a run, albeit a meandering one, back to the $60 per barrel mark. The global benchmark hit $58.55/bbl at 8 a.m. ET, rising some 1.4% from the previous close. There is still a ways to go, however, to reach the yearly peak so far of $68.91/bbl set January 6.
A spokesperson for the National Health Commission in China said Wednesday the number of new cases of the 2019-nCoV in Hubei province, the epicenter of the outbreak, has slowed. For four straight days, the number of patients discharged from hospital in Hubei outnumbered newly-reported cases. That could manifest eventually in some easing on travel restrictions, which would subsequently breathe some life back into the fuel markets, where stifled demand has led to a build in inventories in Asian ports. The Chinese central bank brushed off concerns about long-lasting damage to the economy, saying the demand destruction from the virus would “definitely not” lead to inflationary pressures.
Following the path blazed by its peers at OPEC and the IEA, the US Energy Information Administration lowered its forecast for global demand, citing the impact of the coronavirus on liquid fuels. Global demand will be more than last year, though the travel restraints prompted the agency to cut China’s total petroleum and liquid fuels demand by 190,000 bpd in 2020. Balancing that somewhat are reports that activity in the Vaca Muerta shale, billed as Argentina’s answer to the Permian basin in the United States, was slowing. That does not bode well for a new administration pegging economic recovery on the energy sector. Argentina is grappling with inflation of more than 50% and some $100 billion in sovereign debt. The collapse of fragile economies like these could have a jenga-effect on the global market.
Elsewhere, Russian energy company Rosneft is rising from the ashes of US sanctions pressure on Wednesday. Washington this week slapped the Russian oil giant on the wrist for propping up the Venezuelan government of Nicolas Maduro, though the Kremlin said it was not deterred. With the US commitment to the Middle East waning, there are indications, meanwhile, that a Turkish offensive in Syria is imminent. In Iraq, US forces continue to come under pressure from Iranian proxies, though that could be equivalent to terrorist chatter given the visit to the region by US Secretary of State Mike Pompeo and weekend elections in Iran.