Oil prices inched higher on Monday, as concerns about declining fuel demand due to the coronavirus epidemic in China are offset by expectations of further OPEC+ production cuts. The price of the international Brent variety added 0.03 USD, or 0.05%, to 57.35 USD per barrel, while the futures on the US light crude oil WTI rose by 0.12 USD to 52.16 USD per barrel.

Japan, the world’s fourth-largest consumer of oil, reports a 6.3% contraction in its economy from October to December. Authorities in the country said they expect a further decline in the January-March quarter due to China’s flu infection. Singapore also warned of the potential for a recession this quarter due to the spread of coronavirus in Asia.

“Oil remains sharply vulnerable to both oversupply and economic slowdowns in China and other parts of Asia due to the coronavirus”, says Jeffrey Halley, senior market analyst at OANDA.

The International Energy Agency (IEA) said the coronavirus would lead to a drop in oil demand by 435,000 barrels per day in the first quarter of 2020 compared to the same period last year. This would be the first quarterly decline in raw material purchases since the financial crisis in 2009.

Capital Economics analysts said over the weekend that it was too early to predict the long-term economic effects of the epidemic, and investors would rely on production data in February, especially in Asia, to get early signals of how significant the virus is affecting global supply chains.

“We think the data will be weak, but if better than expected, then commodity prices could rise further”, said the analysts.

The crude oil prices ​​have risen on a weekly basis over the past 7 days for the first time since early January because of optimism that China’s stimulus measures could lead to a recovery in oil demand in the world’s largest importing country.

Investors also expect that OPEC countries and their allies will approve the proposed deepening of production cuts by a panel of experts. The group, also known as OPEC+, already has an agreement to cut production by 1.7 million barrels per day by the end of March. The Technical Committee of the group recommended reducing production by another 600,000 barrels per day due to the effects of the coronavirus.