LONDON (Reuters) – Oil prices dipped on Monday on weaker Chinese oil demand in the wake of the coronavirus outbreak and as traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped more than 20% from a peak in January after the spreading virus hit demand in the world’s largest oil importer and fuelled concerns of excess supplies.
Brent crude LCOc1 slipped to $53.89 a barrel by 1455 GMT, down 58 cents or 1.1%. U.S. West Texas Intermediate CLc1 fell 24 cents to $50.08 a barrel or 0.5%.
“The concern remains that the wider markets have yet to reflect the full impact of the disruption,” said Saxo Bank commodity strategist Ole Hansen.
“With China being the world’s most dominant consumer of raw materials, the impact continues to be felt strongly across key commodities and the world is facing the biggest demand shock since the 2009 global financial crisis.”
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.
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 and its allies to cut production by a further 600,000 barrels per day (bpd).
The group, known as OPEC+, has been implementing cuts of 1.2 million bpd since January 2019.
Algeria’s oil minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter.
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 oil market will be waiting on Russia’s response, to see if the OPEC+ can prove itself as being a proactive producer group in dealing the coronavirus virus outbreak which, like SARS, is effectively a negative demand shock,” BNP Paribas analyst Harry Tchilinguirian told the Reuters Global Oil Forum.
Oil traders also said they were concerned the proposed reduction would not be sufficient to tighten global markets as China’s state refiners have said they would cut refining throughput by about 940,000 bpd this month.
Reporting by Noah Browning in London and Florence Tan in Singapore; Editing by Edmund Blair, Kirsten Donovan