Oil prices see biggest monthly loss since May amid demand pessimism

HOUSTON (Xinhua) – Oil prices fell for the week ending January 31 with the price of West Texas Intermediate (WTI) for March delivery down 4.85 per cent and Brent crude oil for March delivery down 4.17 per cent.

After four consecutive weeks of decline in oil prices, WTI and Brent crude decreased by 15.56 per cent and 11.88 per cent, respectively, in January, witnessing the biggest monthly loss since May 2019.

Rising crude inventories were only part of the problem. The market was concerned that the recent coronavirus outbreak will stymie oil demand in China.

WTI closed the week at USD51.56 a barrel on the New York Mercantile Exchange, while Brent crude finished the week at USD58.16 a barrel on the London ICE Futures Exchange, falling below the 60-dollar threshold. The US Energy Information Administration reported on Wednesday a build of 3.548 million barrels of crude oil inventories during the week ending January 24, more than an expected increase of 0.482 million barrels, implying weaker demand and bearish for crude prices.

Meanwhile, the US Dollar Index closed the week below the 98.00 level after testing 2020 highs. The index met some solid resistance near 98.20.

A man walks past an oil-refining plant in Belarus. PHOTO: AP

A higher index makes the US-dollar-sensitive crude oil more expensive for foreign buyers.

The Organisation of the Petroleum Exporting Countries (OPEC) is trying to keep prices from dipping any more.

The market expects the OPEC and its allies to push additional cuts of crude oil output when next meeting in February or March. However, analysts believe that current market fundamentals have prevented any significant bull run on oil prices and the market is susceptible to softer prices if the outbreak stretches through February, even as Libyan exports remained halted by a political dispute.

“The uncertainty in oil prices and world demand, especially with the recent international geopolitical tension and health events, have continued to stifle acquisition and development activity for US oil and gas producers,” Robert Martinez, CEO of Titan Rock Exploration and Production, told Xinhua.

According to Martinez, price instability kills deals, and “the price swing cycles are more frequent than what a typical deal cycle takes from evaluation to close.”