Oil prices edged higher on Thursday as investors focused on the possibility of deeper supply cuts from the world's biggest producers.
Oil prices retreated amid the IEA's prediction, with Brent crude falling 0.5 percent to $55.48 as of 7:21 a.m. Thursday.
"The spread of the coronavirus remains extremely fluid and while market sentiment is held at the mercy of each passing coronavirus headline, our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand", said Helima Croft, head of commodity strategy at Citadel Magnus.
United States gasoline futures jumped more than one percent supported by outages at ExxonMobil Corp's 502,500 bpd Baton Rouge refinery in Louisiana and Phillips 66's 285,000-bpd Bayway refinery in New Jersey. The organisation and its allies led by Russian Federation have implemented such curbs since 2017 to revive prices that had become depressed by a glut of crude.
"The Russians have pretty much signalled that everyone is on board for OPEC+ delivering deeper production cuts", said Edward Moya, senior market analyst at OANDA Corporation in NY.
"As long as the coronavirus does not show strong signs that the spreading of the virus is intensifying, WTI crude could make a run towards the mid-$50s", he added.
"The recent outbreak of the coronavirus in China necessitated a further downward revision to the country's oil demand growth forecast compared to last month, as transportation fuels, notably aviation fuels, are expected to be impacted" in the first half of this year. The cartel said it now expects 2020 daily oil demand growth to be 990,000 barrels per day (bpd), which is 230,000 bpd below prior forecasts. Brent is 3.3% higher for the week, the first increase since the week of January 10.
"Given the strength seen in the market this week, it suggests participants were factoring in even larger demand hits as a result of COVID-19 (the coronavirus)", said ING analyst Warren Patterson.
"Lower oil prices, if sustained, are also bad news for highly responsive USA oil companies, but we are unlikely to see an impact on output growth until later in the year", the agency said.