Oil Snaps Five-Day Rally as Virus Continues to Weigh on Demand

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Oil fell, snapping a five-day rally, amid renewed fears over the impact on the global economy and fuel demand from Asia’s deadly coronavirus.

Brent futures fell 2.3% to trade near $56 a barrel in London, slipping with equity markets asApple Inc. warned it will fail to meet sales targets this quarter because of disruption from the virus. Chineserefineries continue to trim processing rates, and at least two trading houses have rentedcrude-oil storage tanks in South Korea as a supply glut looms.

Citigroup Inc. said that markets had becomeoverconfident in expecting a V-shaped rebound from the epidemic and oil prices are likely to remain weak during the first half of the year.

The supply-chain recovery in China could be problematic despite the stimulus pledge from Beijing, Citigroup analysts including Edward Morse said in a note to clients. Total Chinese product demand may drop by about 3.4 million barrels a day in February and be 1.5 million barrels per day lower on average in the first quarter.

Brent oil rallied the past five days — the longest run of gains this year — amid optimism the worst economic impacts of the coronavirus had been accounted for. China pledged a raft offiscal stimulus measures to offset the disruption, and Singapore planned toboost spending to counter the slowdown in tourism and trade.

“The short-covering rally failed to gain traction, with the overhang of supply weighing on the market,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S in Copenhagen. “Activity is slowly picking up, and while oil demand for storage has remained robust, the demand for products remains low. The market will have to live with this being — at best — a W-shaped recovery rather than a V-shaped one.”

More on coronavirus:
  • London’s Annual Oil Get-Together Week Hit by Coronavirus

Brent for April settlement fell $1.21 to $56.46 on the ICE Futures Europe exchange as of 1:16 p.m. in London. West Texas Intermediate futures for March delivery declined $1.02 from Friday’s close to $51.03 a barrel. There was no settlement Monday due to the Presidents’ Day holiday in the U.S.

Other oil-market news
  • Glencore Plc joined rivals in reporting a blockbusterresult in oil trading in 2019, with the world’s largest commodity merchant saying it enjoyed a “stand out” year.
  • China’s commercialcrude oil stockpiles at ports rose to 28.44m tons in week of Feb. 13, according to a note posted on official WeChat account of industry consultant Oilchem China.
  • CGG SA completed its final seismic survey,ending an 89-year history of roaming the world in search of oil to focus instead on data science and high-tech equipment.
  • Heavy full-range naphtha prices in Asia havedropped below the lighter variety of the feedstock amid lower demand and higher-than-usual shipments from Europe.

— With assistance by James Thornhill

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