Oil prices headed lower Monday as the death toll and number of those infected rose with China’s deadly influenza spread over the weekend, inciting fresh fears that the illness could hurt global energy demand.
“The virus is fuelling fears of a cooling of oil demand, which would mean that the global oil market would be oversupplied to an even greater extent if no further measures are taken to reduce supply,” said analysts at Commerzbank, in a note to clients.
West Texas Intermediate crude for March delivery CLH20, -2.80% CLH20, -2.80% slid 90 cents, or 1.7%, to $53.29 a barrel on the New York Mercantile Exchange. The contract fell $1.40, or 2.5%, to end at $54.19 a barrel on Friday, and last week dropped 7.5%, the largest such fall for a most active contract since May, according to FactSet data.
March Brent crude BRNH20, -2.92% declined by $1.32, or 2.2%, to $59.37 a barrel. On Friday, the contract fell $1.35, or 2.2%, to close at $60.69 a barrel on ICE Futures Europe, contributing to a 6.4% weekly decline.
Both WTI and Brent are poised for their lowest settlements since Oct. 21, according to FactSet data.
China extended this week’s Lunar New Year holiday and took increasingly drastic measures to halt the spread of the coronavirus, amid warnings it was growing more contagious. As of Monday, the death count rose to 80 and the number of infected neared 3,000 confirmed cases. In the U.S., there are now five confirmed cases, with a handful of infections in other countries, such as France and Japan.
Rattling investors, in Wuhan, China — the epicenter of the virus’s outbreak — the mayor said that five million of the city’s 11 million people had left the city before the travel ban was imposed. As well, reports that the virus may be infectious during its incubation period may make containment even more difficult.
For the oil markets, “the real question remains whether the virus will continue to cause disruption beyond the near-term, with an extended outbreak, related quarantines, and general slowing of economic activity capable of imposing significant downside risk for global oil demand,” said Robbie Fraser, senior commodity analyst at Schneider Electric.
On the other hand, delegates from the Organization of the Petroleum Exporting Countries have “urged market participants to avoid overreacting to near-term developments, questioning whether the virus represents a real challenge to long-term economic and oil demand growth,” said Fraser, in a daily note. “Nonetheless, reports indicate officials are also considering additional production cuts in the coming months as a way to offset any lost demand.”
Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said his country was watching to see how the coronavirus might impact the global economy, but that OPEC stands ready to respond if the oil market is destabilized, according to Reuters.
The oil minister said the current impact on crude futures and other markets was “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand.” He added that he believed the spread of the virus would come under control through China and international efforts.
In other energy trading, February gasoline RBG20, -3.92% fell 2.8% to $1.4727 a gallon, while February heating oil HOG20, -4.44% dropped 2.5% to $1.6901 a gallon. February natural gas NGG20, +1.85% rose 2.5% to $1.941 per million British thermal units.
Natural-gas prices have gained some support as weather forecasts over the eight- to 14-day period “turn colder for parts of the Northern US,” said Christin Redmond, commodity analyst at Schneider Electric.
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January 27, 2020 at 06:38PM
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Oil prices fall to their lowest levels in over 3 months coronavirus stokes fears of weak demand - MarketWatch
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