U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday after Russia said it would need more time before committing to output cuts along with OPEC and other producers amid falling demand for crude as China battles the coronavirus epidemic.
Russian Foreign Minister Sergei Lavrov said on Thursday that Moscow supported cooperation with other producers, in remarks which appeared to boost prices in early trading.
However, Energy Minister Alexander Novak said on Friday Russia needed a few days to analyze the oil market and would clarify its position on deeper cuts next week.
Novak also predicted global oil demand may fall by 150,000-200,000 barrels per day (bpd) in 2020 amid the virus – a relatively conservative forecast.
Earlier in the week, BP finance Chief Brian Gilvary told Reuters the economic impact of the coronavirus will reduce oil consumption for the whole year by 300,000 to 500,000 bpd, roughly 0.5% of global demand.
Earlier in the session, prices retreated from their highs after China’s central bank governor said the world’s second-biggest economy may experience disruptions in the first quarter.
Eurasia Group said it estimates a contraction in oil demand in China, the world’s biggest importer of crude, of as much as 3 million bpd in the first quarter from 2019 levels.
Meanwhile, JPMorgan cut its estimate for Brent to average $60.40 a barrel in 2020, down $4.1 from its earlier forecast.
Look for the crude oil market to remain under pressure on Friday with Russia asking for more time to analyze the oil market before making its decision on additional production cuts. If market conditions were normal then this would lead to a sideways trade. But time is of the essence and I suspect that traders are likely to overreact to the downside.
We could even see new lows for the week today if speculative buyers decide to dump their positions ahead of weekend. Furthermore, since Russia may not make a decision for a week, traders may not want to hold positions over the weekend since the coronavirus epidemic could escalate.
This article was originally posted on FX Empire