The U.S crude benchmark settled at its lowest in more than a year

Recap: Oil futures declined on Wednesday, with the U.S crude benchmark settling at its lowest in more than a year as global energy demand worries fed by the spread of COVID-19 pulled prices down for a fourth consecutive session. Prices briefly turned to the upside after the EIA reported a larger than expected draw in U.S gasoline inventories last week. Despite the less than expected build in U.S. crude oil inventories last week, traders appear to be more concerned about the effects the coronavirus is having on demand.  April WTI fell $1.17, or 2.3%, to settle at $48.73 barrel. That was the lowest front-month contract finish since January 2019. April Brent lost $1.52, or 2.8%, to $53.43 a barrel, for the lowest settlement since Feb. 10. March RBOB fell 5.1% to $1.4549 a gallon, while March heating oil declined by 4.4% at $1.4994 a gallon.

Technical Analysis:  WTI fell to a fresh low, as it continued to pull away from the $50.00 level. At this point in time, we could see a bounce back to that level, where we would expect to see a round of fresh selling. To the downside, we would not discount a run toward $47.50 and below that $45.00.

Fundamental News: The World Health Organization Director-General, Tedros Adhanom Ghebreyesus, said the sudden increase in coronavirus cases in Italy, Iran and South Korea is “deeply concerning”, but the virus can still be contained and does not amount to a pandemic.  For the first time on Tuesday, the number of new cases officially reported outside China of 427 by 37 countries has exceeded new cases reported by Beijing.  Separately, World Health Organization Europe Director, Hans Kluge, said the number of recorded cases of coronavirus has increased to 80,988 across 33 countries, but added that there is no need to panic over the outbreak.   

The US issued travel advisories for Iran, Italy and Mongolia, warning of the risks of coronavirus or disruptions related to efforts to control the spread of the disease.  The US State Department urged US citizens to exercise increased caution when traveling to Italy and said those in Iran should also be careful.  It also urged US citizens to reconsider visiting Mongolia due to travel and transport restrictions put in place in response to the spread of the coronavirus in neighboring China.

Goldman Sachs’ equity research cut its 2020 oil demand growth forecast to 600,000 bpd from 1.2 million bpd and lowered its Brent price forecast to $60/barrel from a previous estimate of $63/barrel.  It anticipates 100,000 bpd of quarterly US oil growth on average, with fourth quarter increasing by 300,000 bpd quarter on quarter.

Vitol sees US oil production peaking at about 14 million bpd in the next few years.  Vitol’s Chief Executive, Russell Hardy, said oil production is expected to peak because it takes so much operationally just to maintain levels. 

IIR Energy reported that US oil refiners are expected to shut in 1.191 million bpd of capacity in the week ending February 28th, cutting available refining capacity by 161,000 bpd from the previous week.  Offline capacity is expected to increase to 1.311 million bpd in the week ending March 6th. 

Early Market Call – as of 9:05 AM EDT

WTI – Apr $46.67, down $2.05

RBOB – Mar $1.3767, down 7.74 cents

HO – Mar $1.4632, down 3.33 cents

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