Oil declined for the fifth straight week as a spreading 2019 novel coronavirus outbreak clouded the demand outlook and OPEC awaited Russia’s decision on whether to cut production.
Futures in New York fell 2.4 percent for the week, posting the longest weekly losing streak since 2018.
Chinese refiners are processing 15 percent less crude than before the outbreak as the infection crimps demand.
Meanwhile, Russia hesitated to accept a proposal by OPEC+ to cut output by 600,000 barrels a day.
Russian Minster of Energy Alexander Novak promised an answer to the proposal in “days.”
“It’s wait and see right now,” said Rob Haworth, who helps oversee about US$150 billion at US Bank Wealth Management in Seattle. “Investors have tried to reprice for what they think demand shortfall could be due to the coronavirus and the quarantines, but all those are really guesses for everyone at the moment.”
In the US, gasoline futures rose to the highest in more than a week after Phillips 66 shut the sole fuel-making unit at its Bayway refinery in New Jersey, the largest on the east coast.
Futures rose 1.7 percent to settle at US$1.5239 per gallon (3.8 liters).
Majors, including Total SA and BP PLC, projected a significant hit to global oil demand this year due to the outbreak, compounding fears of a supply glut plunging the market’s structure into a bearish contango.
Both state-owned and private refineries in China have scaled back processing by at least 2 million barrels a day over the past week, said people with knowledge of operations at the nation’s largest complexes.
So-called throughput could fall further as demand for aviation and transportation fuels continues to shrink as entire cities remain locked down and travel is restricted, the people said.
West Texas Intermediate (WTI) for March delivery fell US0.63 to settle at US$50.32 a barrel on the New York Mercantile Exchange. The contract is down 2.4 percent for the week.
Brent for April delivery lost US$0.46 to settle at US$54.47 a barrel on the London-based ICE Futures Europe exchange, putting the premium over WTI at US$3.92.
The Brent contract is down 3.8 percent for the week.
China’s trade data for last month were scheduled to be released on Friday, but would instead be announced together with this month’s numbers, China’s General Administration of Customs said.
‘FORCE MAJEURE’
Two of Europe’s biggest energy companies rejected a Chinese force majeure on liquefied natural gas (LNG) contracts in the latest twist to a drama that is gripping global commodities markets.
Royal Dutch Shell PLC and Total did not accept the legal grounds for the move by China National Offshore Oil Corp (CNOOC, 中國海洋石油) that would have freed it from its contractual obligations to take delivery of the shipments, people with knowledge of the matter said.
While CNOOC is still likely to cancel delivery of the prompt cargoes, suppliers would probably seek compensation from the firm, said the people, who asked not to be identified.
CNOOC made the dramatic move as it struggled to take delivery of LNG because of constraints caused by the outbreak, which include a lockdown of more than 50 million people in more than a dozen cities.
It was one of the first known cases of the legal clause being invoked in commodity contracts due to the outbreak, which has plunged raw materials markets into chaos.
Other Chinese firms, including PetroChina Co (中石油) and Sinopec Group (中國石化集團), are mulling invoking force majeure on contracts, but have not officially declared yet.
PetroChina was forced to delay discharge timings for multiple cargoes because it cannot get enough workers to its Rudong, Dalian and Caofeidian LNG terminals to run them at full capacity.
At least five LNG vessels headed to China have been diverted or are idling offshore as the outbreak constrains the country’s ability to take deliveries and cuts demand, according to ship-tracking data compiled by Bloomberg and data intelligence firm Kpler SAS.
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