Oil rises 2% as fall in new China corona virus cases eases fuel demand concerns

SEOUL/LONDON (Reuters) – Oil prices extended gains on Wednesday as China reported its lowest daily number of new corona virus cases since late January, stoking investor hopes that fuel demand in the world’s second-largest oil consumer may begin to recover from the epidemic.

Brent crude LCOc1 was up $1.13, or 2.1%, at $55.14 per barrel at 1118 GMT. U.S. West Texas Intermediate (WTI) CLc1 rose 82 cents, or 1.64%, to $50.76 a barrel.

According to data through Tuesday, the growth rate of new coronavirus cases in China has slowed to the lowest since Jan. 30. Still, international experts remained cautious over forecasting when the outbreak might reach a peak.

“As the growth rate of new cases has decreased … that has improved the (market) sentiment,” said Kim Kwang-rae, commodities analyst at Samsung Futures in Seoul.

Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.

The world’s top oil exporter Saudi Arabia has reduced crude supplies to some Asian buyers in March, sources said.

The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday. Both benchmarks are down more than 20% from highs reached in January.

The U.S. Energy Information Administration (EIA) on Tuesday cut its global oil demand growth forecast for this year by 310,000 bpd on lower consumption in China.

“Front month prices are down around 20% since the start of the outbreak, with Brazilian, West African and Russian crudes – all popular with independent (Chinese) refiners in Shandong – under pressure,” said Roger Diwan, vice president of financial services at HIS Markit, in a note.

On the supply side, the Organization of the Petroleum Exporting Countries has recommended a further cut of 600,000 bpd last week to stem the oil price fall. OPEC is now waiting for a response from ally Russia whether Moscow would help execute the cuts.

U.S. crude inventories rose by 6 million barrels in the week to Feb. 7 to 438.9 million barrels, beating analysts’ expectations for an increase of 3 million barrels, data from industry group the American Petroleum Institute showed.

Official EIA data is due on Wednesday at 1030 EDT (1530 GMT).