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Oil jumped more than 3% on Wednesday as China reported the lowest number of new coronavirus cases since the end of January, easing concerns about a drop-off in demand for oil. Prices also got a boost as traders eyed potentially steeper production cuts from OPEC.
U.S. West Texas Intermediate crude gained 3.5%, or $1.77, to trade at $51.67 per barrel, while international benchmark Brent crude rallied 4%, or $2.23, to trade at $56.24 per barrel.
FundStrat’s Tom Lee said in a note to clients Wednesday that prices were “boosted as worries ease over coronavirus disease’s hit to crude demand.”
On Tuesday night China’s National Health Commission said there were 2,015 confirmed new cases of the coronavirus on the mainland and 97 additional deaths, bringing the total numbers to 44,653 confirmed cases and 1,113 deaths.
In a closely-watched monthly report published Wednesday, OPEC cut its forecast for oil demand growth this year, saying the coronavirus outbreak was the primary reason.
The cartel said it now expects 2020 daily oil demand growth to be 990,000 barrels per day (bpd), which is 230,000 bpd below prior forecasts.
This, in turn, could encourage OPEC and its allies, known as OPEC+, to implement additional production cuts.
“The impact of the Coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020,” OPEC said in the report.
An OPEC+ technical committee last week recommended expanding production cuts to steady the market price, although Russia’s oil companies support keeping the current cuts in place for another quarter but not expanding them. Moscow’s official response is yet to be seen.
RBC’s global head of commodity strategy Helima Croft said that the move higher is “signs that we are getting close to Russia signing off on the OPEC+ deeper cut.”
Despite Wednesday’s bounce, WTI and Brent are still trading in bear market territory.
“The near-term trend remains bearish right now as lingering concerns about the coronavirus continue to weigh on energy market sentiment,” Sevens Report found Tom Essaye said Wednesday.
The U.S. Energy Information Administration will release its weekly inventory report at 10:30 amET on Wednesday.
– CNBC’s Michael Bloom and Sam Meredith contributed reporting.