WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled higher on Friday, with benchmark crude futures notching their first weekly gain since early January, bolstered by strong economic indicators in the United States and hope for additional Chinese stimulus should the coronavirus outbreak considerably slows its economic growth.
On the session, NYMEX March West Texas Intermediate futures advanced $0.63 to $52.05 barrel (bbl), while gaining 3.5% on the week. ICE April Brent contract moved up $0.98 to $57.32 bbl and registered a 5.3% increase from last Friday (Feb. 7). NYMEX March RBOB futures edged up 0.31 cents to finish at $1.5833 gallon and front-month ULSD futures added 1.9 cents to a better than two-week high $1.6995 gallon. Both product futures advanced more than 3.4% on the week.
Crude futures finished higher after back-and-forth trade Friday following a consumer survey and government data in the United States that showed continued expansion in the world's largest economy. University of Michigan's closely watched consumer's sentiment index jumped to a two-year high 100.9 in February, improving for a sixth straight month. The preliminary reading came well above market expectations for a modest increase of 99.8. Factors behind the ongoing improvement included continued historic low unemployment and easing trade tensions, while consumers' net gains in household income were reported "more frequently in February than at any prior time since 1960."
Market sentiment was also improved by reports of gradual normalization in China's business activity, as factories started to reopen this week and central bank eased monetary policy to counter the negative economic impact of coronavirus.
China's central bank has already pumped billions of dollars into its financial system, but International Monetary Fund expects more stimulus action in the coming days. IMF's Director of Asia and Pacific Department, Changyong Rhee, said Beijing has policy room to provide further fiscal stimulus if coronavirus significantly slows its economic growth.
Assuming lockdowns in central China are lifted in April, most economists expect the damage to Chinese growth to be limited, with gross domestic product growth falling to around 3% to 4% in the first quarter compared with earlier forecasts for above 5% growth.
Bloomberg reported China's independent refineries, also known as teapot refineries, resumed purchases of crude oil on the global market this week, raising hopes that the drop in demand would be short-lived.
Still, all major energy agencies cut their demand forecasts this week, with the International Energy Agency now expecting the coronavirus outbreak to deal a "significant" blow to global oil consumption in the current quarter.
The Paris-based agency cut its demand estimates for the first quarter by 435,000 barrels per day (bpd) compared with a year earlier, making it the first quarterly decrease in a decade. For 2020, the agency has reduced its global demand growth forecast by 365,000 bpd or 30% to 825,000 bpd -- the lowest growth rate since 2011. IEA assumed economic activity from the second quarter would progressively return to normal.
Market participants still await an official policy response from the Organization of the Petroleum Exporting Countries and partners, known as OPEC+. This week's reports indicated Russian oil executives voiced their support for extending an existing 1.7 million bpd in production cuts into the second quarter, while the country's official position is yet to be revealed. The situation remains fluid.
Liubov Georges can be reached at email@example.com
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