Oil prices slipped lower on Monday as traders assessed China’s oil demand following the coronavirus outbreak and waited to see if major producers will cut output further to balance markets.
Oil is off more than 20% from peaks struck in January after a spreading virus hit demand in the world’s largest oil importer and fueled concerns of excess supplies.
Brent crude LCOc1 slipped to $53.63 a barrel in early Asian trade, the lowest since Jan. 2, 2019, before recovering to $54.32 by 0804 GMT, down 15 cents.
U.S. West Texas Intermediate CLc1 fell 17 cents to $50.15 a barrel after striking a low of $49.56.
“The overall sentiment is still bearish but markets are oversold,” said Avtar Sandu, a senior commodities manager at Phillips Futures in Singapore. He said traders took profit from short-selling after prices hit technical support levels.
Beijing has orchestrated support for its companies and financial markets in the past week and investors are hoping for more stimulus to lift the world’s second-biggest economy.
“Normally it takes at least two quarters before things start to pick up but there’s always hope for new stimulus in the market that will buoy the economy,” Sandu said.
Worries over supply were not alleviated on Friday when Russia said it needed more time to decide on a recommendation from a technical committee that has advised the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production by a further 600,000 barrels per day (bpd).
Algeria’s oil minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter.
“The coronavirus epidemic has a negative impact on economic activities, especially on the transport, tourism and industry, in China particularly, and also increasingly in the Asian region and gradually in the world,” Arkab said.
Russia Energy Minister Alexander Novak said Moscow needed more time to assess the situation, adding that U.S. crude production growth would slow and global demand was still solid.
The proposal for the further cuts “failed to alleviate the pressure on oil, in part because the proposal has yet to be formally discussed by OPEC ministers and because Russia continues to push back against further cuts,” Stephen Innes, chief market strategist at AxiCorp said in a note.
“If the cartel fails to reach an agreement, there will be more pain to come in oil (on the) downside.”
Oil traders also said they are concerned the proposed reduction would not be sufficient to tighten global markets as China’s state refiners have said they will cut refining throughput by about 940,000 bpd this month