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Oil futures headed lower Friday, on track for a weekly loss, as strong growth in U.S. employment failed to offset concerns over the global economy fed by the spread of the coronavirus.
“The U.S. economic data doesn’t matter at all [Friday] and it is clearly reflected in the oil prices,” said Naeem Aslam, chief market analyst at AvaTrade.
A report on U.S. employment Friday showed that the economy added 225,000 jobs in January, above the 165,000 jobs expected by economists polled by MarketWatch.
However, investors are more focused on whether the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are “going to do anything with respect to the supply—we need a supply cut,” Aslam told MarketWatch. “The threat to the demand equation is huge from the coronavirus’ impact, and this is where major concerns are.”
Against that backdrop, oil has been under pressure, sliding into a bear market — a decline of at least 20% in an asset from a recent peak — earlier this week.
West Texas Intermediate crude for March delivery CLH20, -0.51% was down 35 cents, or 0.7%, at $50.60 a barrel on the New York Mercantile Exchange. April Brent crude BRNJ20, -0.40% was off 22 cents, or 0.4%, at $54.71 a barrel on ICE Futures Europe.
For the week, WTI is headed for a 1.9% weekly slump, while Brent is on pace for a decline of 3.4%, according to FactSet data.
Investors weighed Russia’s response to the reported recommendation of the OPEC+ Joint Technical Committee on Thursday a cut to production of its members and other allies by 600,000 barrels a day, in response to oil demand worries driven by the spread of the virus which originated in China. S&P Global Platts said the recommendation calls for that cut to begin in April and run through June.
But the committee isn’t a decision-making body and the recommendation must be weighed by OPEC’s oil ministers. OPEC+ ministers are scheduled to meet on March 5-6 and haven’t decided to schedule an earlier meeting, according to reports.
The JTC proposal had met with resistance from Russia, news agencies reported. Russian Energy Minister Alexander Novak said on Friday that the country needed more time analyze the oil market and would clarify its position on deeper cuts next week. He also estimated that global demand would drop by 150,000 to 200,000 barrels per day this year due to the epidemic that originated in Wuhan City, China, according to CNBC.
Novak’s comments come as China’s National Health Commission on Friday confirmed more than 31,000 cases of the deadly pneumonialike virus in the country, with more than 630 deaths. The disease also continues to spread outside the country.
Russia, a key producer of crude oil outside of the Organization of the Petroleum Exporting Countries, is a member of a group known as OPEC+ that had been weighing measures to stabilize oil prices beyond its current production curbs, with the virus expected to deliver an economic hit to China, one of the biggest importers of crude oil.
OPEC’s January crude production dropped by 470,000 barrels a day to 29.08 million barrels a day, according to the a survey from S&P Global Platts released Friday. The survey said cutbacks from Saudi Arabia and a Libyan blockade sent OPEC’s output down to a four-month low.
The 10 members with quotas under OPEC’s supply agreement with Russia and other nonmember allies produced 24.82 million barrels a day, down 330,000 barrels below their ceiling of 25.15 million barrels a day, the survey said. That represents a compliance rate of 128% with the output cuts of 1.7 million barrels, from October 2018 levels, that were set in place at the start of this year.
Back on Nymex, March gasoline RBH20, +1.48% rose 1.7% to $1.5233 a gallon, but March heating oil HOH20, -0.95% shed 0.8% to $1.6516 a gallon. March natural gas NGH20, +0.16% traded at $1.877 per million British thermal units, up 0.8%. All three commodities were poised to tally gains for the week.