WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange diverged into mixed trade on Thursday, following media reports Russia has rejected a proposal from Saudi Arabia for an additional 600,000 barrels per day (bpd) in production cuts by OPEC+, as delegates contemplate their policy response to demand destruction in China.
Following back-and-forth uneven trade, NYMEX March West Texas Intermediate futures settled up $0.31 to $51.06 barrel (bbl) and ICE April Brent contract settled down $0.35 to $54.93 bbl. NYMEX March RBOB futures advanced 1.17 cents to $1.4980 gallon, again finding support from a surprise 90,976 bbl draw in U.S. gasoline stocks reported Wednesday. Front-month ULSD contract gained 2 cents to $1.6654 gallon after the Energy Information Administration reported distillate stocks were drawn down a third consecutive week, down 1.5 million bbl.
U.S. equities drifted higher in afternoon trade Thursday, buoyed by fresh developments on U.S.-China trade and easing concerns of a global coronavirus pandemic.
Beijing announced a 50% tariff reduction on $75 billion worth of U.S. goods that takes effect Feb. 14, as part of China's ongoing commitment to open markets for American business and products. Separately, unconfirmed reports of a breakthrough in developing a vaccine against the virus slowed selling in Brent futures and boosted U.S. oil futures.
Any bullishness was contained however, as the spread of coronavirus outbreak shows little sign of slowing down. The disease has so far killed more than 560 people worldwide, mostly in China, and infected more than 28,000 people in over 25 countries.
Oil futures gave up earlier gains on reports the Organization of Petroleum Exporting Countries and Russia were unable to reach consensus for a 600,000 bpd production cut by the OPEC+ coalition, which would come atop of an existing 1.7 million bpd in cuts by OPEC+ through the end of the first quarter, casting a cloud over the Saudi-Russian alliance.
According to reports, Riyadh initially backed output cuts of 800,000 to 1 million bpd to offset the drop in China's demand, while later agreed on a compromise of 600,000 bpd as a temporary measure. The Russian delegation blocked the proposal, saying it was too early to assess the impact of the virus on global oil demand.
China's Sinopec Corp. -- Asia's largest refinery -- announced it was cutting throughput this month by 600,000 bpd or around 12% -- its steepest cut in over a decade, in response to slowing oil demand. According to sources, Sinopec has also suspended purchases of West African crude and is looking to resell at least five of its March-loading Angolan cargoes. Analysts suggest oil market will suffer at least four months of depressed demand because of the coronavirus outbreak, with a large crude surplus not expected to ease at least until August.
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