NEW YORK (Reuters) - Oil prices rose on Friday, on track for their first weekly gain since early January as investors bet the economic impact of the coronavirus would be short-lived and hoped for further Chinese central bank stimulus to tackle any slowdown.
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo
Brent crude LCOc1 rose 82 cents, or 1.5%, to $57.16 a barrel by 11:43 a.m. EST (1643 GMT). It has risen 5.9% since last Friday, its first weekly increase in six weeks.
U.S. West Texas Intermediate (WTI) CLc1 rose 66 cents, or 1.3%, to $52.08 a barrel. It was set for a weekly gain of 3.5%.
“The massive liquidation process that drove prices sharply lower last month has likely been completed and is being replaced by accumulation as well as short-covering from speculators who have recently entered the market,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Brent has fallen 15% since the beginning of the year in part due to worries the coronavirus outbreak would stunt the global economy. More than 1,350 people have died from the virus in China.
However, market sentiment improved as factories in China started to reopen and the government eased monetary policy in the world’s second largest economy.
The World Health Organization also noted the big jump in China’s reported cases did not necessarily mean a wider epidemic but reflected a decision to reclassify a backlog of suspected cases.
“Our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand,” said Helima Croft, head of commodity strategy at Citadel Magnus.
The International Energy Agency (IEA) said first-quarter oil demand was set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the outbreak.
In response to the demand slump, the Organization of the Petroleum Exporting Countries and allied producers, a grouping known as OPEC+, are considering deepening production cuts.
The Kremlin has said no decision has been taken yet on whether Russia agrees to further output curbs. But oil sources said a growing oil glut in Russia and the promise of a flood of dollars from the sale of a leading bank are strengthening the case for Russia to cut output.
UBS investment bank said in a note that commodity demand concerns were likely to linger and “the asset class should display a fair bit of volatility in the coming weeks.”
“We assume China’s economic activity as well as commodity demand will recover” from the second quarter, it said.
Additional reporting by Bozorgmehr Sharafedin in London, Roslan Khasawneh and Koustav Samanta in Singapore; Editing by Jan Harvey, Edmund Blair and David Gregorio
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Oil rises 1% on hopes demand will rebound from coronavirus effect - Reuters
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