U.S. crude rebounded after data showed a smaller than expected U.S. inventory build. Earlier in the sessions WTI dropped below $50 on Wednesday, the lowest level since January 2019, as Asia, Europe and oil producing countries in the Middle East reported hundreds of new coronavirus cases and the United States warned of an inevitable pandemic.
The U.S. Energy Information Administration said Wednesday that inventories for the week ending Feb. 21 increased by 500,000 barrels. According to FactSet, analysts had been expecting a build of 1.8 million barrels.
Pandemic fears intensified as authorities around the world battled to prevent the spread of coronavirus, which has now been found in about 30 countries.
World stocks tumbled for the fifth straight day on Wednesday, while safe-haven gold rose back towards seven-year highs and U.S. bond yields held near record lows after governments and health authorities warned of a possible coronavirus pandemic.
Goldman Sachs reduced its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its Brent forecast to $60 a barrel from $63.
“We see oil prices improving through the year assuming demand begins to normalize in 2020,” it said, referring to the second half of 2020.
Earlier, oil prices rose on short-covering and amid hopes for deeper output cut by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a group known as OPEC+.
Saudi Arabia’s energy minister said on Tuesday he was confident that OPEC and its partners, known as OPEC+, would respond responsibly to the spread of the coronavirus.
OPEC+ are due to meet in Vienna over March 5-6. “OPEC+ may decide to trigger more supply cuts at next weeks meeting, but this may only have a limited effect on oil prices, as demand-side concerns are expected to continue having a major sway on the commodities complex,” Han Tan, market analyst at FXTM said. The International Energy Agency’s (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.
Growth in U.S. shale oil production will slow sharply over the next two years, the CEO of U.S. oilfield services giant Schlumberger said.