Oil fell to below $57 a barrel on Tuesday, pressured by concerns over the impact of the coronavirus outbreak in China on oil demand and a lack of any further action by OPEC and its allies to support the market.
Forecasters including the International Energy Agency have cut 2020 oil demand estimates because of the virus. Global experts say it is too early to judge if the outbreak is being contained, despite a fall in new cases in mainland China. Brent crude LCOc1 was down $1.04 at $56.63 a barrel by 0940 GMT. The contract had rallied in the previous five sessions. The US West Texas Intermediate crude CLc1 fell 83 cents to $51.22.
Coronavirus is having a wider impact on companies and financial markets
"Oil prices remain heavy (under pressure) as energy traders may have been overly optimistic as to the crude demand impact of the coronavirus, and on fading optimism that OPEC+ will come through with deeper production cuts in March," Edward Moya, senior market analyst at broker OANDA, said.
The virus is having a wider impact on companies and financial markets. Asian shares fell and Wall Street was poised to retreat on Tuesday after Apple said it would miss its March quarter revenue guidance due to weakened demand in China. "This has spooked market players and triggered a sharp pullback in risk assets," said Tamas Varga of oil broker PVM, referring to Apple's statement.
OPEC+ to cut oil output by 1.7 million bpd until March-end
The IEA said last week oil demand was likely fall by 435,000 barrels per day (bpd) year-on-year in the first quarter because of the coronavirus, in what would be the first quarterly drop since the financial crisis in 2009. The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia have been considering a further cut in production to tighten supply and support prices.
The group, known as OPEC+, has a pact to cut oil output by 1.7 million bpd until the end of March. The next OPEC+ meeting in March is set to consider an advisory panel's recommendation to lower supply by a further 600,000 bpd. Talks on holding an earlier meeting in February appear to have made no progress, OPEC sources said. As well as OPEC+ voluntary curbs, support for prices has come from involuntary losses in Libya, where output has collapsed since Jan. 18 because of a blockade of ports and oilfields.