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Oil rises for third day as coronavirus impact may spur output cuts

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Oil prices rose for a third day on expectations that major producers are likely to enact deeper output cuts to offset the slump in demand caused by the coronavirus outbreak in China, the world's second-largest crude consumer.

FILE PHOTO: Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

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SEOUL: Oil prices rose for a third day on expectations that major producers are likely to enact deeper output cuts to offset the slump in demand caused by the coronavirus outbreak in China, the world's second-largest crude consumer.

Brent crude rose 17 cents, or 0.3per cent, to US$55.96 per barrel at 0217 GMT. U.S. West Texas Intermediate (WTI) rose 29 cents, or 0.6per cent, to US$51.46 a barrel.

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The Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, recommended last week an additional output cut of 600,000 barrels per day (bpd) to its current 1.7 million bpd reduction to offset the disease-related demand losses.

OPEC yesterday lowered its 2020 forecast for demand for the group's crude by 200,000 bpd, prompting expectations that OPEC+ will enact the cuts when the group next meets, possibly as early as this month.

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Russia's government has not made clear that it will endorse the deeper cuts but a majority of Russian oil companies want the cuts extend through the second quarter at least, a senior Lukoil official said on Wednesday.

"Oil is up as OPEC awaits an official response from Russia regarding proposed production cuts," Stephen Innes, chief market strategist at AxiCorp, said in a note on Thursday.

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Oil may also be rising as traders who opened so-called short positions, or bets that prices will fall, are buying futures contracts to lock in profits from the recent plunge in oil prices, said Innes.

Brent and WTI have fallen more than 20per cent from their 2020-peak in January. The contracts rose over 3per cent on Wednesday as a slowdown in new Chinese coronavirus cases boosted expectations of a demand recovery.

Those expectations for a price recovery "should send more shorts running for cover," Innes said.

Still, data on the nuRead More – Source