Oil snaps 5-week losing streak with best week of the year

Oil prices rose on Friday, on track for their first weekly gain since early January as investors bet the economic impact of the coronavirus would be short-lived and hoped for further Chinese central bank stimulus to tackle any slowdown.

Brent crude was up 89 cents or 1.6% at $57.23 per barrel. It has risen 4.4% since last Friday, its first weekly increase in six weeks. U.S. West Texas Intermediate gained 63 cents or 1.2% to settle at $52.05 per barrel, up 3.3% for the week.

“The massive liquidation process that drove prices sharply lower last month has likely been completed and is being replaced by accumulation as well as short-covering from speculators who have recently entered the market,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Brent has fallen 15% since the beginning of the year in part due to worries the coronavirus outbreak would stunt the global economy. More than 1,380 people have died from the virus in China.

However, market sentiment improved as factories in China started to reopen and the government eased monetary policy in the world’s second largest economy.

The World Health Organization also noted the big jump in China’s reported cases did not necessarily mean a wider epidemic but reflected a decision to reclassify a backlog of suspected cases.

“Our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand,” said Helima Croft, head of commodity strategy at Citadel Magnus.

The International Energy Agency (IEA) said first-quarter oil demand was set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the outbreak.

In response to the demand slump, the Organization of the Petroleum Exporting Countries and allied producers, a grouping known as OPEC+, are considering deepening production cuts.

The Kremlin has said no decision has been taken yet on whether Russia agrees to further output curbs. But oil sources said a growing oil glut in Russia and the promise of a flood of dollars from the sale of a leading bank are strengthening the case for Russia to cut output.

UBS investment bank said in a note that commodity demand concerns were likely to linger and “the asset class should display a fair bit of volatility in the coming weeks.”

“We assume China’s economic activity as well as commodity demand will recover” from the second quarter, it said.

In the United States, energy firms increased oil rigs for a second week in a row, adding two oil rigs in this week, bringing the total count to 678, energy services firm Baker Hughes Co said.