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Oil futures looked to tally a second day of gains on Tuesday, partly boosted by hope for coordinated efforts by global central banks and governments to address the novel coronavirus outbreak.
Prices also gathered support from expectations for a further cut to oil production by the Organization of the Petroleum Exporting Countries and its allies at a meeting later this week.
“Firstly, traders are hoping that the upcoming OPEC+ meeting is going to bring good news for them. They are expecting a supply cut because Russia has agreed to this,” said Naeem Aslam, chief market analyst at AvaTrade.
“Finally, the hopes of a coordinated action by central banks to rescue the global economy are also having a positive influence on the price,” he wrote.
April West Texas Intermediate crude CLJ20, +1.60% rose 98 cents or 2.1%, at $47.73 a barrel on the New York Mercantile Exchange, while the global benchmark, May Brent crude BRNK20, +1.33%, advanced 99 cents, or 1.9%, at $52.89 a barrel on ICE Futures Europe. Both grades of crude oil posted gains of 4.5% on Monday—the biggest daily percentage rise of the year so far.
A Tuesday statement from Group of Seven financial ministers indicated a willingness to use fiscal and monetary policy to fight the coronavirus impact on the economy but the statement didn’t outline specific steps.
Meanwhile, OPEC ministers were gathering in Vienna ahead of a key March 5-6 meeting with allied oil producers to help determine the magnitude of cuts to output that might be needed to combat coronavirus, according to Reuters.
“Energy markets are convinced the bottom is in place and that global policy makers will not disappoint and that OPEC + will at the very least deliver an additional 1 million bpd cut at this week’s meeting in Vienna,” said Edward Moya, senior market analyst at Oanda.
“Oil’s next big move could be determined by the size of OPEC + new curbs. If we see 1.2 to 1.5 million [barrels a day] in additional cuts, that could be enough to drive Brent tentatively back above the $55 a barrel level, with WTI crude testing the $50 handle,” he said in a daily update. “Anything below a million could trigger significant selling that could wash away at least half of this week’s gains.”
Read: Coronavirus and Russia pose the biggest challenges for OPEC+ efforts to lift oil prices
The Wall Street Journal reported Monday that de facto OPEC leader, Saudi Arabia, has offered a compromise for Russia and other countries that have been reluctant to adopt deeper cuts to production.
Riyadh has proposed that OPEC+, a group including members of the cartel and other major producers like Russia cut crude output by 600,000 barrels a day but along with Saudi Arabia, take on the bulk of individual cuts, reducing its output by an additional 400,000 barrels a day, the report said.
Leonid Fedun, vice president of Russia’s second-largest oil producer Lukoil, on Tuesday told Reuters that a 1 million barrel per day additional cut would be enough to balance the market and lift oil prices back to $60 a barrel. The comments come after Russia’s President Vladimir Putin said Sunday that he’s ready to cooperate with OPEC+ partners, and believes the group can help keep long-term oil prices stable.
Back on Nymex, petroleum product prices followed oil higher, with April gasoline RBJ20, +0.38% up 0.5% at $1.5466 a gallon and April heating oil HOJ20, +0.58% adding 0.8% to $1.5416 a gallon. April natural gas NGJ20, +3.70% traded at $1.821 per million British thermal units, up 3.8%.
