Oil Up For Third Straight Day Despite Bleak Coronavirus News

One analyst believes traders are trying to lock in profits: File Image/PixaBay

Crude prices rose for a third straight day on Thursday, and while expectations of deeper output cuts to counter China‘s coronavirus was cited as the reason for the uptick, at least one analyst thinks it could be merely the result of contracts being bought to lock in profits.

Indeed, even though news in previous sessions was that the number of new virus cases was down, a report on Thursday showed that new cases in Hubei province, the epicentre of the outbreak, jumped by 14,840 on February 12 to 48,206, and deaths climbed by a daily record of 242 to 1,310.

Also, Russia‘s government has still not made clear that it will endorse the deeper crude output cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC) to offset a perceived weakening in demand caused by the virus, also known by its scientific name of Covid-19; the Kremlin on Thursday stated it was still assessing the matter.

The consequences of Covid-19 for global oil demand will be significant

The International Energy Agency

Adding to Thursday’s bleak news was the International Energy Agency stating that oil demand is set to fall this quarter for the first time since the financial crisis in 2009, due to the virus; demand in the first quarter of 2020 is expected to fall by 435,000 barrels per day (bpd) compared with a year earlier.

The IEA also stated that “China was responsible for around three-quarters of last year’s global oil demand growth; before the outbreak…..it was expected to drive over a third of oil consumption growth in 2020, but now we think it will be less than a fifth.

“The consequences of Covid-19 for global oil demand will be significant.”

Stephen Innes, chief market strategist at AxiCorp, expressed his suspicion in a note on Thursday that oil may be rising as traders who opened so-called short positions are buying futures contracts to lock in profits from the recent price plunge.

For the record, Brent on Thursday rose 17 cents to $55.96 per barrel, and West Texas Intermediate  rose 29 cents to $51.46 per barrel.

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