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Oil prices bounce back on possible medical advances over Coronavirus

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Oil futures rose for a second day on Thursday as investors took optimism around unconfirmed reports of possible medical advances to combat the coronavirus outbreak in China as a sign fuel demand could rebound in the world’s biggest oil importer.

Prices also gained after a government report on Wednesday showed US gasoline and diesel inventories fell.

Brent futures rose by 62 cents, or 1.1 per cent, to $55.90 a barrel having risen 2.4 per cent in the last session, while the US West Texas Intermediate, WTI, futures gained 73 cents, or 1.4 per cent, to $51.48 a barrel after rising 2.3 per cent on Wednesday.

Commodities, equities and other markets have been buoyed by unconfirmed reports of a possible advance in producing treatment drugs for the coronavirus that has shut down transport and limited industrial activity in China. However, the World Health Organization has played down the reports of “breakthrough” drugs being discovered.

Furthermore, an additional 73 people on the Chinese mainland died on Wednesday from the virus, the highest daily increase since the outbreak started, and another 3,694 new cases were reported, raising the total to 28,018.

In the US, gasoline stockpiles dropped last week, counter to analysts’ expectations for a gain, and diesel inventories fell more than expected, the Energy Information Administration, EIA, reported. However, crude stockpiles rose rose by a more-than-expected 3.4 million barrels last week to 435 million barrels.

“While small falls in US product stocks suggest demand is holding up, it would take a surge in US consumption to even go some of the way to offset the slump in China’s consumption owing to the outbreak of coronavirus,” Capital Economics said.

Commodity supply chains in China have been disrupted to the extent that short-term sales of crude oil, along with liquefied natural gas, fell to nearly zero this week.

Buyers in China, the world’s biggest importer of most commodities, are considering taking legal action to avoid honouring purchase agreements.

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