Oil prices edged lower on Monday as investors brace for economic data in Asia due this week that should give a reading on how China’s coronavirus epidemic has affected oil demand.
Brent crude LCOc1 was at $56.99 a barrel, down 33 cents by 0121 GMT after rising 5.2% last week, the biggest weekly gain since September 2019.
U.S. West Texas Intermediate crude CLc1 fell 13 cents to $51.92 a barrel, after a 3.4% gain last week.
The weekly gains, the first since early January, were spurred by hopes that stimulus measures taken by China to support its economy amid the coronavirus outbreak could lead to a recovery in oil demand in the world’s largest importing country.
But the International Energy Agency (IEA) said the virus is already set to cause oil demand to fall by 435,000 barrels per day (bpd) in the first quarter from the same period a year ago, in what would be the first quarterly drop since the depths of the financial crisis in 2009.
Analysts at Capital Economics said over the weekend that it is too soon to start assessing the longer-term economic fallout from the epidemic.
“Attention will be paid (this week) to the range of flash manufacturing PMIs (purchasing managers’ indices) for February, particularly those in Asia, as these should provide an early indication of how significantly the virus is affecting global manufacturing supply chains,” Capital Economics said.
“We expect the data to be weak, but if they are better-than-expected then industrial commodity prices could see further gains.”
Investors are also anticipating that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will approve a proposal to deepen production cuts in a move to tighten global supplies and support oil prices.
The group, also known as OPEC+, has an agreement to cut oil output by 1.7 million bpd until the end of March.
A technical committee has recommended the group reduces production by another 600,000 bpd because of the impact from the coronavirus on China’s oil demand.
Russia, facing a growing oil glut, could support further output cuts.
(This story corrects OPEC+ cuts at 1.7 million bpd, not 2.1 million bpd, in paragraph 10)