Viral Outbreak Halts Short-Term Oil and Gas Sales to China
February 6, 2020
The OPEC+ Joint Technical Committee extended their meeting another day. It appears that this group will make a recommendation to cut an additional 600,000 bpd. It appeared that many were on board for additional cuts, but Russia offered some push back. But they came to the recommendation mentioned above and that will now be up to the official OPEC+ group to decide.
Short term sales of crude oil and liquified natural gas into China almost ground to a halt this week as the coronavirus slowed its economic activity and cut demand.
Wood Mackenzie lowered its first quarter 2020 oil demand forecast by about 900,000 bpd to 98.8 million bpd. It stated that most of the decline is attributable to efforts to contains the outbreak of the coronavirus inducing flight cancellations.
The DOE inventory report from yesterday said that crude oil stocks were up 3.36 million barrels. Gasoline stocks were reported down 91,000 barrels and distillate stocks were down 1.51 million barrels. Gasoline and distillates had declines and that was not what the market was looking for so that helped support yesterday’s rebound.
Propane stocks were up 560,000 barrels with the Midwest stocks down 762,000 barrels and the Gulf Coast stocks up !.071 million barrels.
Also helping to support the rally yesterday as new that China would cut in half some $ 75 billion of duties on US imported goods starting February14th.
Reports are indicating that the coronavirus might be better contained than many thought with most of the impact in Wuhan the city were the virus started. This is adding some optimism to the impact of the virus. This is a very fluid situation and good or bad news about the virus will move the market as this is the biggest concern for the markets right now.