WASHINGTON (DTN) -- Except for the front-month ULSD contract, oil futures on New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower on Tuesday, with West Texas Intermediate under $50 per barrel (bbl).
The losses came after Russia's energy minister, Alexander Novak, cast doubt on expected production curbs by Organization of the Petroleum Exporting Countries and allies in an effort to offset lost oil demand in China amid the coronavirus outbreak.
Tuesday afternoon, oil traders also positioned ahead of the release of supply data on last week's change in U.S. crude and petroleum stocks. Market consensus is leaning toward a mixed report for the final week of January, with crude oil stocks seen to have expanded by 2.6 million bbl and gasoline supply increased by 1.5 million bbl, while distillate fuels projected to have decreased by 800,000 bbl on the week. American Petroleum Institute will release its preliminary data 4:30 p.m. EST, followed by Wednesday's Energy Information Administration report at 10:30 a.m. EST.
In market-on-close trade, NYMEX March WTI broke below the psychological $50 per bbl mark to settle at $49.61 for the first time since January 2019. ICE April Brent contracts also fell below support at $54 bbl level for a $53.96 bbl settlement. Both crude contracts traded as much as 2.5% higher in midmorning trade. NYMEX March RBOB futures dropped 3.05 cents to a better-than-five-month spot low $1.4432 gallon and March ULSD contract managed to claw back 0.6 cent for a $1.5839 per gallon settlement, moving off a nearly 30-month spot low at $1.5684.
Bolstered by rallying equities and reports of deeper OPEC+ cuts, oil complex attempted a modest recovery on Tuesday, lifting crude futures from their 13-month lows on the spot continuous chart. As OPEC ministers began their two-day technical meeting to address an emerging demand shock in China, reports emerged the group considers deeper supply cuts of as much as 500,000 barrels per day (bpd) to 1 million bpd to halt the decline in prices. However, oil futures quickly reversed earlier gains after Novak said he was not convinced the group needs to tighten supplies at the current time.
"It is important now to evaluate the right forecasts. There are lots of uncertainties, maybe those are panic attacks," Novak told reporters.
Discussions of deeper cuts come less than two months after the 23-nation coalition agreed to curb output 1.7 million bpd through the end of March. Its next meeting was originally scheduled for March 5-6.
OPEC officials will continue their emergency meeting on Wednesday and are taking the outbreak of the SARS virus in 2003 as an example to assess the potential impact of the coronavirus on demand, according to Reuters. OPEC's own analysis shows a drop between 200,000 and 400,000 bpd from China's coronavirus, which would substantially lower their current projection China's oil demand this year at 13.39 million bpd.
As of Tuesday afternoon, the Wuhan coronavirus shows no signs of slowing, as China reported another major spike in both confirmed cases and deaths in the region at the heart of the epidemic. Independent forecasts show Chinese economy will likely enter technical recession in the first half of 2020, which is defined as two consecutive quarters of GDP contraction. China's economy grew at annualized rate of 6.1% in 2019, which now could be lowered by as much as 1.6% to 4.5% in the first quarter.
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