Oil prices gain momentum as traders anticipate deeper output cuts

At the end of trading activities on Tuesday, oil prices extended gains on the expectations that finance houses will provide financial stimulus to offset the impact of the coronavirus outbreak and also on growing optimism that OPEC will order deeper output cuts this week.

For instance, brent crude rose 1.5 per cent to $52.69 per barrel, while U.S. West Texas Intermediate (WTI) was up by 1.8 per cent at $47.60 a barrel.

Brent and WTI have rebounded somewhat over the past two days after sliding more than 20 per cent from their January peak on signs the spread of the coronavirus had dented fuel demand.

Oil experts on Tuesday said that that oil prices recovered, in part, last weeks lost ground on the back of a general relief rally on markets, economic stimulus reassurances and expectations for petro-nations supply cuts.

Traders, howeverm believed that the coronavirus outbreak will dent demand for longer than initially feared but a drastic transport disruption seems unlikely.

We gathered that, G7 finance ministers will also discuss this week how best to cushion the impact of the outbreak on economic growth,

Meanwhile, due to lingering worries over oil demand amid the virus outbreak, several key members of the Organization of the Petroleum Exporting Countries (OPEC) are mulling a bigger oil output cut of possibly 1 million barrels per day (bpd), which the initial proposal was for an additional reduction of 600,000 bpd.

OPEC and its allies, known as OPEC+ are expected to announce deeper output cuts at their meeting on March 5-6 in Vienna. The group had agreed to cut output by 1.7 million bpd in a deal that runs to the end of March.

The Vice President of Russian second biggest oil producer Lukoil, Leonid Fedu said, OPEC’s proposal to cut oil production by up to 1 million barrels per day would be enough to balance the market and lift oil prices back to $60 a barrel.

This comment is coming on the height that Russia may be willing to agree to OPEC’s proposals for fresh cuts to output.

Sources averred that, oil stockpiles in the United States, the world’s biggest crude producer and consumer, are expected to rise for a sixth week by 3.3 million barrels, while refined product inventories are forecast to fall.