By Roslan Khasawneh
SINGAPORE, Feb 14 (Reuters) - Oil prices were steady on
Friday but are set for their first weekly gain in six weeks on
the assumption major producers will implement deeper output cuts
to offset slowing demand in China, the world's second-largest
crude user.
Brent crude futures LCOc1 fell 9 cents to $56.25 a barrel
by 0234 GMT, after gaining 1% the previous session. Brent is
3.3% higher for the week, the first increase since the week of
Jan. 10.
U.S. West Texas Intermediate (WTI) futures CLc1 were down
by 1 cent to $51.41 a barrel. The contract rose 0.5% on Thursday
and is now 2.2% higher for the week.
Crude prices have plunged about 20% from their 2020-peaks on
Jan. 8 as oversupply concerns combined with worries about large
fuel demand declines in China as the country's quarantine to
fight a coronavirus outbreak has halted economic activity.
However, the Organization of the Petroleum Exporting
Countries and its allied producers, known as OPEC+, are
considering cutting output by up to 2.3 million barrels per day
in response to the demand slump.
But other analysts caution the demand impact is only limited
to China so far.
"The spread of the coronavirus remains extremely fluid and
while market sentiment is held at the mercy of each passing
coronavirus headline, our baseline thesis remains that oil
demand destruction remains largely a China story and has yet to
spill over to impact global demand," said Helima Croft, head of
commodity strategy at Citadel Magnus.
The market is signalling that some near-term demand for oil
remains. The spread between the first-month April Brent future
and the May contract has narrowed to a discount of only 1 cent a
barrel on Friday from a discount of 33 cents a week ago.
LCOc1-LCOc2
The narrowing of this contango, when prompt prices are less
than later-dated contracts, suggest that demand for oil is
improving for Brent-related crude.
Still, some concern remains about the impact the Chinese
demand slowdown may have.
The International Energy Agency (IEA) on Thursday said that
first quarter 2020 oil demand is set to fall versus a year
earlier for the first time since the financial crisis in 2009
because of the coronavirus outbreak in China. The Chinese economy is expected to grow at its slowest rate
since the financial crisis in the current quarter, according to
a Reuters poll of economists who said the downturn will be
short-lived if the outbreak is contained.