Fears of the coronavirus outbreak and its impact on demand continue to pressure global markets

Recap: At one point, April WTI fell more than 5.8% to a session low of $45.88, the lowest level for a front month since Jan. 2019, before paring some of its losses. April Brent crude dropped 4.7%, to a low of $50.97, Brent’s lowest level since Dec. 2018. Fears of the coronavirus outbreak and its impact on demand continue to pressure global markets. Traders are also focused on the March 5-6 OPEC+ meeting, which is to take place in Vienna. So far OPEC and its allies have failed to come to an agreement on additional reductions in output. Prices recovered some of their losses, with April WTI settling at $47.09 a barrel, down $1.64, or 3.4%, which was the lowest settlement for a front month contract since early January 2019.  April Brent dropped $1.25, or 2.3%, to $52.18 a barrel. The contract, which expires at Friday’s settlement, marked the lowest settlement since December 2018. March RBOB dropped 3% to $1.4106 a gallon, while March heating oil fell 0.7% to $1.4892 a gallon. The March contracts expire at Friday's settlement.

Technical Analysis: WTI tumbled deeper into bearish territory, sitting 29% below its 52-week intraday high of $66.60, reached last April. Coming into Friday’s session, we would look for a run at the long standing downward weekly trend line currently set at $45.59. For now we think that the $45.00 level will hold. To the upside, resistance is set at $47.50 and above that $50.00.

Fundamental News: The head of the World Health Organization, Tedros Adhanom Ghebreyesus, said the new coronavirus outbreak has reached a “decisive point”.  He urged countries to redouble efforts to contain its spread effectively. 

Goldman Sachs equity research updated its Brent price forecast for the first half of the year from $63/barrel to $57/barrel and to $63/barrel from $60/barrel for the fiscal year.  The lower crude price view reflects near term demand uncertainty as a result of the coronavirus. 

Saudi Arabia is reducing its crude supplies to China in March by at least 500,000 bpd due to slower refinery demand following the coronavirus outbreak.  China normally imports 1.8 million bpd to 2 million bpd of Saudi crude. 

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp refining and storage hub in the week ending February 27th fell by 6.1% on the week but increased by 0.18% on the year to 1.123 million tons.  Gasoil stocks fell by 6.08% on the week and by 12.01% on the year to 2.117 million tons, while fuel oil stocks increased by 11.22% on the week and by 27.33% on the year to 1.16 million tons. 

US EPA Administrator, Andrew Wheeler, said the EPA does not have an announcement yet on how it will respond to the 10th Circuit court decision addressing exemptions to US biofuel blending laws.  He made his comments a day after a Bloomberg News report that the administration had decided to pare the number of exemptions granted to smaller refineries from US biofuel blending laws.  In late January, the federal court said the EPA must reconsider some exemptions it previously granted to oil refineries. 

The US economy grew moderately in the fourth quarter.  The US Commerce Department reported that GDP increased at a 2.1% annualized rate.  The economy grew by an unrevised 2.3% in 2019, the slowest annual growth in three years.

The International Monetary Fund said the coronavirus will clearly have an impact on global economic growth and added that it will likely downgrade its growth forecast as a result. 

Early Market Call – as of 9:05 AM EDT

WTI – Apr $45.42 down $1.62

RBOB – Mar $1.3827 down 0.0180

HO – Mar $1.4757 down 0.0147

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