Oil jumps 3% on reports of effective coronavirus drug

LONDON: Oil prices jumped by more than 3% on Wednesday on media reports that scientists have developed a drug against the fast-spreading coronavirus that continued to weigh heavily on global economic activity.

News that the Organisation of the Petroleum Exporting Countries (OPEC) and its producer allies are considering further output cuts to counter a potential squeeze on global oil demand further supported prices that had collapsed by more than 20% since early January.

Both Brent crude oil futures and US West Texas Intermediate (WTI) crude jumped by more than 3% in morning trade. By 1220 GMT Brent was up US$1.35, or 2.5%, at US$55.31 a barrel and WTI was up US$1.25, or 2.5%, at US$50.86.

China’s Changjiang Daily, the official newspaper of the city of Wuhan where the virus outbreak began, reported that a team of researchers led by Zhejiang University professor Li Lanjuan has found that drugs Abidol and Darunavir can inhibit the virus in vitro cell experiments.

Separately, it was reported that a British scientist has made a significant breakthrough in the race for a vaccine by reducing part of the normal development time from two to three years to only 14 days.

A vaccine will be too late for the current virus but the breakthrough will be crucial if there is another outbreak.

The World Health Organisation played down the media reports, saying there are “no known effective therapeutics” against the virus.

Thousands of passengers and crew on two cruise ships in Asian waters were placed in quarantine for China’s coronavirus on Wednesday as airlines, car manufacturers and other global companies counted the cost of the fast-spreading outbreak.

Demand impact

The economic slowdown resulting from the virus outbreak is expected to reduce 2020 global demand growth by 300,000-500,000 barrels per day (bpd), roughly 0.5% of global demand, BP’s Chief Financial Officer Brian Gilvary said.

“The (Chinese) economy will be weakened for some time to come as quarantines, social distancing and travel restrictions remain in place,” BNP Paribas analyst Harry Tchilinguirian said.

“But as financial markets are anticipatory, one can see how favourable news in relation to potential medical solutions, or indications that we have reached a turning point in the progress of the virus outbreak, are likely to be interpreted positively.”

OPEC and allies led by Russia, a group known as OPEC+, weighed the impact on global oil demand and economic growth from the coronavirus outbreak at a meeting on Tuesday, hearing from China’s envoy to the United Nations in Vienna.

Producers are considering further output cuts and moving a planned policy meeting to February rather than March.

“This is a critical time for oil prices and even if we see OPEC+ deliver deeper production cuts, an extended shutdown of China will destroy demand for crude’s top importer,” said Edward Moya, an analyst at broker OANDA. – Feb 5, 2020, Reuters

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