Oil climbs 1% over production cuts in coronavirus impact

Oil prices gained over 1% on Wednesday, underpinned by news of potential extended production cuts by OPEC+ to counter weak global oil demand caused by coronavirus outbreak.

Brent crude oil futures LCOcl gained 1.4%, or 74 cents, at $54.70 per barrel by 0326 GMT. West Texas Intermediate crude futures rose 1.2%, or 61 cents, at $50.22 per barrel.

OPEC+ held a meeting on Tuesday to discuss the impact of the virus outbreak on economic growth and global oil demand, with a representative of China to the United Nations in Vienna.

Producers are considering to extend production cuts and move a March policy meeting to February.

Analyst Edward Moya of broker OANDA said that these measures could prove ineffective if the virus problem persists longer in China, the largest importer of crude oil and key factor in global energy demand.

“This is a critical time for oil prices and even if we see OPEC+ deliver deeper production cuts, an extended shutdown of China will destroy demand for crude’s top importer,” Moya said.

Elsewhere, US crude oil stocks climbed 4.2 million barrels at the end of January, at 432.9 million barrels, above analyst expectations of 2.8 million barrels.