(Bloomberg) -- Oil held near $50 a barrel amid signs that OPEC and its allies probably won’t go ahead with an emergency meeting, even as global supply piles up while the coronavirus wreaks havoc on demand.
Futures fell as much as 1.5% in New York on Monday. Azerbaijan’s Energy Minister Parviz Shahbazov told the RIA Novosti newswire that the coalition is unlikely to hold an early meeting in February. Saudi Arabia is pushing for action, yet key partner Russia has so far resisted. At the same time, China may need to cut crude imports by as much as 1.1 million barrels a day on average over the next four months, according to IHS Markit Ltd.
“Disagreement in the cartel is a top concern,” said Muhammed Ghulam, senior associate at Raymond James. “People in China will be getting back to work so that’s positive, but the fear on the demand side is huge.”
OPEC+ has struggled to reach a consensus on how to respond to the coronavirus outbreak in Asia and its impact on demand that sent oil prices plunging to one-year lows last week. People in China will be returning work after the Lunar New Year holiday. The death toll has now exceeded that of SARS in 2002-2003.
A discount on prompt crude, which appeared in Brent front-month contracts last week for the first time in a year, is taking hold in the futures market. The pattern, which is known as contango and usually indicates oversupply, now extends all the way through to September contracts.
Another indicator closely watched by traders -- the so-called red spread between December contracts in consecutive years -- is also shifting toward contango after collapsing from $1.31 a barrel in late January to just 2 cents on Monday.
The Organization of Petroleum Exporting Countries and its allies have shown some readiness to intervene, with a committee of technical experts counseling last week that the coalition -- which pumps about half the world’s oil -- should deepen existing production curbs by an additional 600,000 barrels a day during the second quarter.
The proposal has gained support from Iran and Bahrain. Yet Russia, the biggest crude producer within the group, hasn’t yet announced whether it will back the policy, or a meeting before the group’s scheduled early March gathering to make it happen.
West Texas Intermediate crude for March lost 50 cents to $49.82 a barrel on the New York Mercantile Exchange as of 11:33 a.m. local time. It closed 1.2% lower on Friday.
Brent for April delivery fell 84 cents to $52.63 a barrel on the London-based ICE (NYSE:ICE) Futures Europe exchange after losing 0.8% Friday.
