Oil prices were mixed on Wednesday as worries about the coronavirus outbreak and swelling U.S. crude inventories weighed on prices, counter-balanced by talk that OPEC could extend oil output cuts.
Brent crude rose 30 cents, or 0.5 per cent, to settle at $59.81 per barrel. U.S. crude ended at $53.33, down 15 cents or 0.3 per cent.
Financial markets are trying to assess economic fallout as the virus spreads out of China where the death toll continues to rise, while airlines cut flights to China.
“Following the outbreak of coronavirus, commodities markets suffered from a technical selloff,” said Michel Salden, senior portfolio manager of Vontobel Asset Management. But oil prices would likely rebound soon after a 14 per cent drop so far, far more than the fall in stock markets.
Majors airlines, including American Airlines, British Airways and Lufthansa, have suspended direct flights to and from mainland China due to the outbreak.
Jet fuel demand has slumped in Asia as airlines have canceled connections.
U.S. crude inventories grew more than expected last week, while gasoline stocks hit record highs for a second week in a row, the Energy Information Administration said in its weekly report.
Crude inventories rose by 3.5 million barrels in the week to Jan. 24, as refiners cut runs and demand for gasoline and diesel slipped. Gasoline stocks rose for a 12th straight week to an all-time high at 261.2 million barrels, the EIA said.
“We have seen a number of refinery maintenance announcements both planned and unplanned over the past week or two, and that is reflected in a setback for refinery operations,” Anthony Headrick, energy market analysts at CHS Hedging LLC in Inver Grove Heights, Minnesota.
The Organization of the Petroleum Exporting Countries wants to extend production cuts, currently planned till the end of March, until at least June, and could deepen reductions should oil demand in China fall significantly due to the coronavirus, OPEC sources said.
OPEC and its allies, including Russia, have been trying to stabilize prices in the face of sagging global demand and rising supplies, particularly from the United States.
“Will deeper OPEC supply curbs provide the panacea for the current oil market malaise? Probably not,” said Stephen Brennock of oil broker PVM. “The oil cartel, therefore, faces an uphill battle to support oil prices.”