The coronavirus outbreak and decisions by the OPEC+ alliance – or lack thereof – weighed heavily on the oil market last week. Some informed market observers told Rigzone that should not change this week, but one added that another factor should become increasingly evident soon. Read on for their insights.
An annual ritual
Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business, said that he expects more of the same regarding the coronavirus. In addition, he pointed out that an annual planned maintenance ritual among U.S. refiners should also begin to influence the market.
“Coronavirus will continue to impact the global economy and energy demand,” he said. “U.S. refinery demand for crude could lower as refineries enter turnaround to prepare for summer blends of gasoline.”
OPEC+ meeting fallout
When Rigzone interviewed Steve Blair, senior account representative with the RCG Division of Marex Spectron, on Friday, the OPEC+ alliance of oil producers were still meeting to discuss a possible deal to curb output. The group subsequently failed to reach an agreement. Blair noted the outcome of the meeting should weigh heavily on the oil market this week.
“Looking at market expectation and trend, prices of both West Texas Intermediate (WTI) and Brent are now reaching levels not seen since mid-2017, and if no production cut agreements come out of this meeting today there will probably be more further downside action in both the crude and products markets,” said Blair. “This downside action could be accelerated if the coronavirus situation worsens due to further decreased travel and the potential disruption to local and global business. The market trends all depend upon the direction of these two situations.”
Oil prices had plunged by nearly one-third as of Monday morning, and Goldman Sachs has warned that prices near the $20 mark were possible, Bloomberg reported.
To contact the author, email mveazey@rigozne.com.
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