SEOUL, Feb 13 (Reuters) - Oil prices rose for a third day on
expectations that major producers are likely to enact deeper
output cuts to offset the slump in demand caused by the
coronavirus outbreak in China, the world's second-largest crude
consumer.
Brent crude LCOc1 rose 17 cents, or 0.3%, to $55.96 per
barrel at 0217 GMT. U.S. West Texas Intermediate (WTI) CLc1
rose 29 cents, or 0.6%, to $51.46 a barrel.
The Organization of Petroleum Exporting Countries (OPEC) and
its allies including Russia, known as OPEC+, recommended last
week an additional output cut of 600,000 barrels per day (bpd)
to its current 1.7 million bpd reduction to offset the
disease-related demand losses.
OPEC yesterday lowered its 2020 forecast for demand for the
group's crude by 200,000 bpd, prompting expectations that OPEC+
will enact the cuts when the group next meets, possibly as early
as this month.
Russia's government has not made clear that it will endorse
the deeper cuts but a majority of Russian oil companies want the
cuts extend through the second quarter at least, a senior Lukoil
LKOH.MM official said on Wednesday.
"Oil is up as OPEC awaits an official response from Russia
regarding proposed production cuts," Stephen Innes, chief market
strategist at AxiCorp, said in a note on Thursday.
Oil may also be rising as traders who opened so-called short
positions, or bets that prices will fall, are buying futures
contracts to lock in profits from the recent plunge in oil
prices, said Innes.
Brent and WTI have fallen more than 20% from their 2020-peak
in January. The contracts rose over 3% on Wednesday as a
slowdown in new Chinese coronavirus cases boosted expectations
of a demand recovery.
Those expectations for a price recovery "should send more
shorts running for cover," Innes said.
Still, data on the number of new confirmed cases in Hubei
province, the epicentre of the outbreak, indicates that the
outbreak and its impact on oil demand will continue. New cases
jumped by 14,840 on Feb. 12 to 48,206, and deaths climbed by a
daily record of 242 to 1,310, the province said on Thursday,
reflecting changes to the diagnostic methodology. Travel restrictions to and from China and quarantines within
the country have curbed oil consumption.
The expectations for lower future fuel demand because of the
virus has shifted the market structure for both WTI and Brent
into a contango, when prompt prices are less than later prices.
The price of the front-month April Brent contract is at a
current discount of 50 cents a barrel to the September future.
Adding to the sense of a well-supplied market, U.S. crude
inventories in the week to Feb. 7 increased by a
more-than-expected 7.5 million barrels to 442.5 million barrels,
the Energy Information Administration said on Wednesday. That is
the highest since the week of Dec. 13. EIA/S