Oil prices rebounded sharply on Monday, amid increasing optimism that the Organization of the Petroleum Exporting Countries will announce production cuts later this week, and on hopes global central banks are ready to support economies amid the coronavirus outbreak.
That’s on the heels of the biggest weekly loss in over a decade for West Texas Intermediate crude amid investor fears the global Covid-19 epidemic will significantly hurt crude demand. U.S. crude futures CLJ20, +3.44% climbed $1.83, or 4%, to $46.55 a barrel, after tumbling 5% on Friday to settle at $44.76 a barrel. For the week, the contract fell over 16%, the biggest weekly fall since December 2008, according to Dow Jones Market Data.
The global benchmark, Brent crude futures BRN00, +3.74% , climbed $2, or 4%, to $51.68 a barrel, after falling 3.2% to settle at $50.52 a barrel on Friday. It fell 14% drop on the week, which was the biggest weekly decline since Jan. 15, 2016.
The gains come as global equities rebounded, with Dow industrial futures YM00, +1.97% surging over 500 points on hopes that the world’s central banks, including the Federal Reserve, will move soon to prevent deeper economic fallout from the fast-spreading and deadly coronavirus. China’s purchasing manager indexes tumbled to record lows for February, pointing to a deep contraction due to the virus.
Fed Chairman Jerome Powell said Friday that the central bank is “closely monitoring” the outbreak, and Goldman Sachs economists wrote Sunday that they expect the Fed to cut interest rates by 50 basis points soon.
Bank of Japan Gov. Haruhiko Kuroda also issued a supportive statement Monday, saying the central bank “will closely monitor future developments,” and vowed “appropriate market operations and asset purchases.” Asian markets sharply rebounded from last week’s selloff as well.
Oil markets will be closely watching a March 5-6 meeting of OPEC and its allies in Vienna to discuss the possibility of additional production cuts in a bid to balance supply and demand. Russian President Vladimir Putin said Sunday that he’s ready to cooperate with OPEC + partners, and believes the group can help keep long-term oil prices stable.
Putin told a meeting of Russian energy officials and producers on Sunday — who met to discuss fallout from the coronavirus — that “for the Russian budget, for our economy, the current oil price level is acceptable,” according to The Moscow Times.