Oil steadies on Opec+ supply cut hopes and Libyan output loss

London — Oil steadied above $56 a barrel on Tuesday after two days of declines as Opec output cuts and Libyan supply losses balanced concerns about the spread of the coronavirus and its impact on oil demand.

Crude fell almost 4% on Monday, with other commodities also posting losses while US and European equities suffered their steepest declines since mid-2016 on concern the coronavirus could turn into a pandemic.

Brent crude rose 5c to $56.35 a barrel by 9.52am GMT. US West Texas Intermediate (WTI) crude was down 14c at $51.29.

“Risk appetite appears to be growing again on the markets,” said Commerzbank analyst Eugen Weinberg. “However, the Covid-19 virus and resulting risks to demand cannot be expected to disappear from the news any time soon.”

Concern that the virus will spread and curb economic growth and oil demand has pushed down Brent crude by almost $10 a barrel this year, despite the involuntary shutdown of most of Libya’s output as well as a supply pact between oil cartel Opec and its allies, including Russia (Opec+).

Prices received further support as lawmakers based in areas of eastern Libya controlled by military commander Khalifa Haftar said on Monday that they would not participate, for now, in peace talks with politicians allied to the internationally recognised government.

“Libyan peace talks appear to have taken a further blow with both sides announcing the end of their participation, pointing to lost crude volumes from the country carrying on for now,” JBC Energy analysts said in a report.

However, oil could come under more pressure from the latest round of US supply reports.

Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 9.30pm GMT.

Potential support for the market could also come from Opec+, which is considering whether to curb output further to offset slowing demand.

Opec+ has been implementing an existing deal to cut output by 1.7-million barrels per day (bpd) since January 1. This month, an Opec+ committee recommended that the group deepen its cuts by 600,000 bpd.

Saudi Arabia’s energy minister said on Tuesday that Opec+ should not be complacent about the coronavirus. Russia, key to any deal, has yet to announce its position on further curbs.

Reuters