Oil steadied above $56 a barrel on Tuesday after two days of declines as OPEC output cuts and Libyan supply losses balanced concerns about the spread of the coronavirus and its impact on oil demand.
Crude fell almost 4% on Monday, with other commodities also reporting losses while U.S. and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic.
Brent crude rose 5 cents to $56.35 a barrel by 1338 GMT. U.S. West Texas Intermediate crude was up 16 cents at $51.59.
“Risk appetite appears to be growing again on the markets,” said Commerzbank (DE:CBKG) analyst Eugen Weinberg. He added that the virus and resulting impact on demand is not expected to disappear anytime soon.
South Korea aims to test more than 200,000 members of a church at the centre of a surge in coronavirus cases. The virus is also spreading in Europe and the Middle East.
Concern about the demand impact from the virus has pushed Brent down by almost $10 a barrel this year despite the shutdown of most of Libya’s output and a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and allies.
Prices received further support as lawmakers based in areas of eastern Libya on Monday said that they would not participate for now in peace talks.
“Libyan peace talks appear to have taken a further blow with both sides announcing the end of their participation, pointing to lost crude volumes from the country carrying on for now,” JBC Energy analysts said in a report.
However, oil could come under more pressure from the latest U.S. supply reports.
Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 2130 GMT.
Potential support for prices could also come from OPEC and allies including Russia, which are considering whether to curb output further. However, scepticism is growing about the chance of further action.
“Doubts are emerging about the willingness of OPEC+ to extend and expand the necessary production cuts,” said Commerzbank’s Weinberg. The producers are due to meet in Vienna over March 5-6 to decide policy.
Saudi Arabia’s energy minister on Tuesday said OPEC+ should not be complacent about the coronavirus. But Russia, key to any deal, has yet to announce its position on further curbs.