Oil edges down as traders assess China's oil demand

Coronavirus impact Opec cuts oil demand forecast for 2020

An OPEC, non-OPEC technical panel has recommended extending a current oil supply cut pact until the end of 2020 and more output reductions due to the impact of the coronavirus on oil demand, Algeria's oil minister said in a statement, Reuters reports.

US crude oil inventories were estimated to have risen by 2.9 million barrels in the week to February 7, a preliminary Reuters poll showed on Monday, which would make it the third week in a row where stock levels have increased.

Crude oil prices rose sharply on Wednesday amid easing worries over the potential negative impact of the coronavirus outbreak on the global oil demand. Global airlines have also halted flights to China.

While the virus outbreak is hurting China's economy - and others affected such as Japan and Singapore - San Francisco Federal Reserve Bank President Mary Daly, said the coronavirus impact on the USA economy has been limited.

"The impact of the coronavirus outbreak on China's economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020", it said. This reading came in much higher than the market expectation for an increase of 3 million barrels.

The group, known as OPEC+, has been implementing cuts of 1.2 million bpd since January 2019. Saudi Arabia, meanwhile, didn't cut the 500,000 bpd it promised, producing 400,000 barrels below its official quota, perhaps signaling that it is "not prepared to shoulder additional output cuts alone, as had been the case for much of 2019", according to Franziska Palmas, assistant economist at the London-based Capital Economics.

"The lack of enthusiasm from the Russians to deliver an additional 600,000 barrels per day in deeper production cuts could prove (costly) in stabilizing prices in the short-term", Edward Moya, senior market analyst at OANDA in NY, said in a report. While production is expected to average at 28.9 million barrels a day in 2020, which is 0.3 million less than expected in January.

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