LONDON (Reuters) – Oil prices were set for their biggest weekly slide since the 2008 financial crisis despite a 5% bounce on Friday, as the coronavirus outbreak threatened demand and crude producers promised more supply.
Brent crude LCOc1 was up $1.83, or 5.5 on the day%, at $35.05 per barrel by 1100 GMT but were still 23% lower on the week – the biggest weekly drop since December 2008.
U.S. West Texas Intermediate (WTI) crude CLc1 was up $1.54 cents, or 4.9%, at $33.05 per barrel but was also on track to lose a fifth of its value over the week.
“It’s been a very rough week and so it’s not impossible people are locking in ahead of the weekend,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
World stocks were also set for their worst week since 2008, with the coronavirus sparking panic selling across markets. [MKTS/GLOB]
Adding to pressure on oil prices, already knocked by the virus as fewer people travel and business events are scrapped, major oil producers were pumping more crude into the market.
Saudi Arabia, the world’s largest exporter, and the United Arab Emirates offered more to customers OPEC’s talks with Russia and others on supply restraint collapsed last week.
Russia, the world’s second-largest producer, has shown no interest in agreeing to further output curbs with the Organization of the Petroleum Exporting Countries.
Russian oil producers met Energy Minister Alexander Novak on Thursday but did not discuss a return to the deal. The head of Gazprom Neft said it planned to hike production in April, following the talks.
“It’s a problem of an oil price war in the middle of a constricting market when the walls are closing in,” U.S. energy historian Daniel Yergin said.
(GRAPHIC: Analysts cut oil price forecasts for 2020 – here)
Goldman Sachs said it now expected a record high oil surplus of 6 million barrels per day (bpd) by April, in a global market that usually consumes about 100 million bpd.
A Reuters survey showed analysts slashed their forecasts of Brent crude prices to $42 a barrel on average in 2020, compared to the $60.63 consensus in a February poll.
“The avenues for a quick off-ramp to the Saudi/Russia price war appear to be closing,” RBC Capital Markets analyst Helima Croft said.
But the price slump may reduce some supply, by forcing out more costly producers.
Energy companies in the United States, which has surged to become the world’s biggest crude producer because of a boom in pricier shale oil, are preparing to cut investment and drilling plans due to plunging prices.
(GRAPHIC: North American oil producers slash spending – here)
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