Oil prices recovered by 1 percent on Tuesday as a sympathy rally overtakes global equity markets. Despite uneasy sentiments regarding the Wuhan virus by investors, Brent crude rose by 1.3 percent to $53.97 per barrel after attaining an intraday high of $54.13. WTI crude oil futures for March rose to $50.13 after climbing 1.3 percent.
The rebound, however, is expected to be mild and short-lived. This is due to energy demand by China likely to remain dampened due to the deadly virus. China state refineries have already stated that they will cut up to 940,000 bpd from their crude runs in February as a result of the virus. Concerns regarding the spread of the coronavirus and the chances of cases arising outside China have left investors jittery.
Moreover, the OPEC+ and Russia will need to work together to set out a comprehensive cut plan to bolster up prices. Russia, however, can afford oil to go as low as $40 per barrel and does not seem as inclined to work with OPEC+ to cut production by a further 600,000 bpd.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+ and including Russia, proposed further cuts last week, however, Russia has asked for more time to decide whether it wants to join in on further cuts.