* China's independent refiners cut output by 30-50%
* OPEC+ considering further 500,000 bpd cut to oil
production
(Updates with settlement prices)
By Jessica Resnick-Ault
NEW YORK, Feb 3 (Reuters) - Oil prices fell to the lowest in
more than a year on Monday as the coronavirus outbreak curtailed
Chinese demand and sparked potential supply cuts by OPEC and its
allies.
Brent crude LCOc1 settled down $2.17, or 3.8% at $54.45 a
barrel, its lowest since January last year.
U.S. West Texas Intermediate (WTI) crude CLc1 fell $1.45 a
barrel to $50.12 after touching a session low of $49.91, also
the lowest since January 2019.
"We have not seen a demand destruction event of this scale
that moves this quickly," said Phil Flynn, analyst at Price
Futures Group in Chicago.
As the outbreak hits fuel demand in China, the world's
biggest crude oil importer, refiner Sinopec Corp 0386.HK told
its facilities to cut throughput this month by about 600,000
barrels per day (bpd), or 12%, the steepest cut in more than a
decade.
Independent refineries in Shandong province, which
collectively import about a fifth of China's crude, cut output
by 30% to 50% in a little more than a week, executives and
analysts said. The outbreak could particularly curtail jet fuel demand
growth in China, wrote analyst Paul Sankey, managing director at
Mizuho in New York. Wuhan airport is China's busiest inland hub
carrying about 25 million passengers per year, and conservative
estimates are that the number of travelers have fallen by about
a third, Sankey said.
The Organization of the Petroleum Exporting Countries (OPEC)
and its allies, a group known as OPEC+, are considering a
further 500,000 bpd cut to their oil output, three OPEC sources
and an industry source told Reuters. The Wall Street Journal reported that another option being
considered would involve a temporary cut of 1 million bpd by
Saudi Arabia to jolt oil markets.
"The market needs assurances that the supply/demand equation
remains in balance for prices to hit a floor. This suggests a
commitment from OPEC not just to extend oil supply cuts, but
even implement deeper ones beyond March," said FXTM analyst
Hussein Sayed.
Iranian Oil Minister Bijan Zanganeh said the oil market is
under pressure with prices dropping below $60 a barrel, and
"efforts must be made to balance it." Ratings agency Fitch on Monday said the coronavirus outbreak
could push the global oil market into surplus and that OPEC+ may
need to cut production further if the outbreak lasts for several
months.
On the first day of trade in China since the Lunar New Year
holiday, investors erased $393 billion from the nation's
benchmark equities index, sold the yuan currency and dumped
commodities as coronavirus fears dominated markets. The first-month Brent contract traded at 8 cents less than
the second-month contract LCOc1-LCOc2 , a reversal from the
front-month premiums seen as recently as last week. The discount
briefly widened to 12 cents, the largest since July.
"There's an expectation that it's not going to last, but
we're oversupplied in the near term," said John Kilduff, a
partner at Again Capital in New York.
The U.S. crude's discount to Brent WTCLc1-LCOc1 narrowed
to as little as $4.32 a barrel, the least since September. Brent
values dropped more precipitously than U.S. crude because China
is the top destination for crude that is priced relative to
Brent, said Kilduff.
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Brent crude price https://tmsnrt.rs/2GSjq5C
Russia ready to hasten OPEC+ meeting to Feb on coronavirus
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