WTI struggles to gain traction in mixed outlook for demand
- Oil prices struggle to extend correction, pressured by mixed sentiment over the coronavirus.
- Global trade in goods is likely to remain weak in early 2020.
The recovery in the price of a barrel of oil has started to fizzle out within a fundamentally bearish landscape and mixed sentiment with regards to the spread of the coronavirus. At the time of writing, WTI is trading at 451.79 having travelled between $51.74 and $52.16, down some 0.97% on the session so far.
Markets are taking the risks associated with the coronavirus in their strides, expecting that it will blow over in a sustainable global economic recovery. However, The World Trade Organisation’s Goods Trade Barometer fell to 95.5 in February from 96.6 in November, well below the index’s baseline of 100 and suggesting global trade in goods is likely to remain weak in early 2020, which should continue to weigh on the price of energy for the foreseeable future. Its too early to cheers the reduction of numbers and new cases of the virus and the WHO warned of just that today. More on that here:
Chinese health authorities confirms 1,886 new cases of coronavirus, and 98 new deaths as of Feb 17
Coronavirus among medics more widespread than reported, research Shows - Caixin
The gains for oil prices may prove fleeting if market participants are given cause to think that the worst of the outbreak is not over yet. Meanwhile, China has curtailed refinery rates and deferred imports as the coronavirus outbreak has hit demand, which should have implications for the global energy complex.
As far as production cuts, President Putin has yet to signal his potential support for an additional OPEC+ curtailment, while the Libyan conflict presents another avenue for more barrels to return to the market. "WTI and Brent Dec-Dec spreads are flirting with contango as the market prices in the oversupply narrative. In this context, however, CTAs could be adding a marginal bid in Brent crude as prices remaining above $56/bbl imply short-covering in response to the lack of a strong trend," analysts at TD Securities argued.