Oil prices rose more than 1% on Wednesday on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak.
U.S. West Texas Intermediate (WTI) futures rose by 53 cents, or 1.12%, to $47.71 a barrel, up for a third session.
Brent crude rose by 58 cents, or 1.12%, to $52.44 a barrel at 0212 GMT, after settling down 4 cents in the previous session.
Brent and WTI have each fallen about 27% their 2020-peak reached in January because of the declining demand from the coronavirus outbreak.
A panel of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, recommended cutting oil output by an extra 1 million barrels per day (bpd) on Tuesday. The recommendation may mean that Russia and Saudi Arabia, the two biggest producers in the OPEC+ group, are close to a deal to support prices.
That would be in addition to 2.1 million bpd in current output cuts that include a 1.7 million bpd in curbs by OPEC+ and other voluntary reductions by Saudi Arabia, the world’s biggest exporter.
OPEC+ had initially been considering an additional cut of 600,000 bpd to offset the coronavirus-related slump in demand. The group is set to meet in Vienna on March 5-6 though with other international conferences being cancelled because of the virus the talks may be held by video.
Uncertainty over the extent of demand erosion arising from the virus outbreak and the unclear timing of a recovery in Libyan output would influence the OPEC+ decision, Barclays analysts said in a research note.
“This is no time for caution for OPEC+. Second-quarter oversupply needed some heavy lifting from the group to offset even before the COVID-19 outbreak, but now it is a must,” the analysts said. It expects OPEC+ will deepen the cuts for the second quarter by at least 500,000 bpd.
Morgan Stanley on Tuesday cut its second-quarter 2020 Brent price forecast to $55 per barrel and its WTI outlook to $50 on expectations that China’s 2020 oil demand growth would be close to zero and demand outside China may slow further because of the virus.