-IEA may revise demand even lower
-Home Depot posts a strong 2019
The price for Brent crude oil dropped in dramatic fashion on Monday on fears the coronavirus could spread quickly beyond China and into the European economy. Markets were softer in early Tuesday trading, with some support coming from a positive earnings report from Home Depot. Germany’s fourth quarter GDP reading, meanwhile, came in as expected at 0.3%, though global demand forecasts are tilting lower.
Brent crude oil was down some 0.1% at 8 a.m. ET to $55.72 per barrel, following a contagion-effect sparked by the rapid spread of the coronavirus in northern Italy. Some parts of the Balkans were reporting infections early Tuesday.
IEA Executive Director Fatih Birol said from the sidelines of the IP energy conference in London that demand was trickling ever slower.
“We certainly see the lowest oil demand growth in the last 10 years and we may need to revise it … downwards,” he told Reuters.
The IEA in its latest monthly report said it expected demand to contract by some 435,000 barrels per day in the first quarter. Parties to the OPEC+ restraint effort offered to pull some 600,000 bpd from the market, though a Russian government satisfied with the current price point has balked thus far. Saudi Energy Minister Abdulaziz bin Salman said Tuesday from Riyadh that producers were still weighing their options.
“We did not run out of ideas, we have not closed our phones,” he was quoted as saying.
Providing some sense of a floor for oil prices is the lack of crude coming out of Libya. Despite some fits and starts, Libyan crude oil production was around 1 million bpd for much of last year. With civil war between rival political factions raging in and around Tripoli, production and exports have been on a steady decline for much of the year. Data provider Kpler reported that exports from Libya averaged only 65,000 bpd during the first three weeks of February.
Markets may be moving somewhat on expectations of another build in US crude oil inventories. The Wall Street Journal poured cold water on any prospects of a rally, however, by reporting that anticipating a V-shaped recovery in China, the center of the virus outbreak, is “extremely optimistic.” Direction may be determined later in the day if US consumer confidence misses. Home Depot reported that, while fourth quarter sales were slightly lower year-on-year, net sales for 2019 improved. The company expected growth of at least 3.5% for this year, with plans to open six new stores.