Crude Oil Rallies Off $50 Level Amid Declining Fuel Demand

After a precipitous drop due to the coronavirus, excess supply, and a number of other factors, West Texas Intermediate crude oil has bounced off the $50 level several times over the last couple of weeks and is making a relatively strong move higher Friday, despite a continuing lack of fuel demand.

WTI crude oil is up over 1% today is approaching $52 a barrel, after moving off a recent low of around $49.50. But the move could be largely technical in nature, as many analysts are still in the camp that crude oil should be moving lower.

The flu-like symptoms of the coronavirus, which was first identified late last year, has millions of people now under travel restrictions in China, which is impacting jet fuel demand, and affected Chinese New Year travel, which represented the world’s largest annual human migration.

“When cities are placed under quarantine, and public transit is shut down, by definition that reduces economic activity and has a negative impact on energy demand, oil included,” Raymond James analyst John Freeman said in a note to clients recently. “Once there is evidence that the outbreak is contained and thus economic disruption subsiding, sentiment on oil should improve, bringing prices back up.”