By Barani Krishnan
Investing.com – Oil bulls can’t seem to catch a break, even with OPEC pledging once again to overdeliver.
Crude prices tumbled 2% Thursday, with Brent finishing under the key $50-per-barrel mark, despite OPEC raising its bar on production cuts to mitigate losses from the coronavirus crisis.
Delegates to the all-important OPEC policy meeting in Vienna were reportedly coalescing around cartel kingpin Saudi Arabia’s plan to cut 1.5 million barrels per day from global output.
The new reduction was 50% above the 1.0 million bpd cut initially floated by OPEC. The higher number was typical of Saudi Energy Minister Abdulaziz bin Salman’s attempts to try and “shock” the market into rallying since he came into office in September.
Yet crude prices failed to rally on Thursday as it became obvious that OPEC’s top ally – Russia – had not yet signed off on the plan.
Another bummer for oil bulls was Wall Street, where the S&P 500 plunged about 3% after California, the second largest U.S. state, declared an emergency from the spread of the coronavirus. The global epidemic has so far killed at least 11 Americans and infected more than 100 others.
West Texas Intermediate, the benchmark for U.S. crude prices, settled down 88 cents, or 1.8%, at $45.90 per barrel.
Brent, the London-traded global benchmark for crude, lost $1.14, or 2.2%, to close at $49.99.
"The coronavirus economic impact could finally be hitting the U.S. labor market," said Ed Moya of online trading platform OANDA. "If the strongest part of the U.S. economy starts to weaken, recession concerns will grow quickly."
"Also, this is a critical moment for OPEC+ as a holdout by the Russians could drive oil prices to their financial crisis lows."
Crude prices fell as much as 16% last week following the loss of hundreds of millions of barrels in demand to the novel coronavirus. It was the market’s worst week since October 2008, when the Great Recession was beginning.
Despite some recovery this week, WTI remained down 24% on the year and Brent down 23%.
The International Energy Agency estimates that year-on-year demand for oil across the world could fall by 435,000 bpd within the first quarter of 2020, the first quarterly contraction in more than a decade.