Oil falls 2% on renewed uncertainties over coronavirus
outbreak
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[February 21, 2020] By
Bozorgmehr Sharafedin
LONDON (Reuters) - Oil prices fell on Friday as a rise in new cases of
coronavirus and weak Asian economic data fuelled uncertainty about the
economic outlook and as major crude producers showed no rush to cut
output.
Brent crude <LCOc1> was down $1.20, or 2%, at $58.11 a barrel by 1136
GMT, while U.S. crude <CLc1> dropped $1.02, or 1.9%, at $52.86 a barrel.
Oil prices had edged up on Thursday after a much smaller-than-expected
rise in U.S. crude stocks.
"With Brent failing to breach the 60 level on Thursday, despite
better-than-expected U.S. oil inventory data, rising market uncertainty
is dragging down oil prices on Friday," said UBS oil analyst Giovanni
Staunovo.
"Market participants who benefited from the price rise in recent days
might prefer not to go into the weekend with a long position due to the
renewed uncertainty," he added.
Finance leaders from the Group of 20 major economies meet in Saudi
Arabia at the weekend to discuss risks to the global economy, as new
Asian economic and health data kept investors on guard.
China reported an uptick in new cases of coronavirus on Friday, with
more than 200 people testing positive in two prisons.
Factory activity in Japan suffered its steepest contraction in seven
years in February, hurt by fallout from the virus outbreak.
"We still believe that the market is likely to trade lower from current
levels, given the scale of the surplus over the first half of this year,
and the need for the market to send a signal to OPEC+ that they must
take further action at their meeting in early March," said ING analyst
Warren Patterson.
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Drilling rigs operate at
sunset in Midland, Texas, U.S., February 13, 2019.REUTERS/Nick
Oxford/File Photo
Russian Energy Minister Alexander Novak said on Thursday that global oil
producers understood it would no longer make sense for the Organization of the
Petroleum Exporting Countries and its allies to meet before their gathering.
The grouping, known as OPEC+, has been withholding supply from the market to
support prices for several years now. Many analysts expect an extension or
deepening of the curbs.
Adding to pressure on oil prices was the strength of the U.S. dollar. A stronger
greenback typically makes oil more expensive for holders of other currencies, as
the commodity is usually priced in dollars. [MKTS/GLOB]
Brent futures moved back to backwardation on Friday, a market structure where
the price of a commodity for future delivery is lower than the spot price.
"The fact that the Brent forward curve has been in backwardation again for
several days indicates at least that the oil supply will probably tighten again
in the short term thanks to the OPEC+ cuts," said Commerzbank analyst Carsten
Fritsch.
(Reporting by Bozorgmehr Sharafedin in London and Aaron Sheldrick in Tokyo;
Editing by Kim Coghill and Edmund Blair)
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