Oil prices plunged Monday and gold rose to a seven-year high as the number of coronavirus cases outside China continued to multiply.
Brent crude, the global benchmark, fell 4.1% to $55.60 a barrel, its sharpest decline in almost five months. The main U.S. oil-price gauge, West Texas Intermediate, fell 3.9% to $51.31 a barrel.
The outbreak has fueled speculation that demand for oil may wane as economic growth slows in China and flights around the world are curtailed to limit the contagion. The drop in demand has prompted Saudi Arabia to consider a break from its four-year oil-production alliance with Russia over its plan to reduce output, a move that would be opposed by Moscow.
The Group of 20 major economies also warned Sunday that the virus posed a serious risk to global growth. Those concerns are multiplying now that new cases are being reported in locations such as Italy, Iran and South Korea.
“It’s another wave of fear, as the virus makes its way to European shores,” said Edward Marshall, commodities trader at Global Risk Management. “We’re trading fear as we wait and see how governments will react with airports and other pieces of infrastructure that are heavy on energy.”
The outbreak is likely to shave roughly 400,000 barrels a day from global consumption growth, taking it to the lowest level in nearly a decade, Warren Patterson, head of commodity strategy at ING, wrote in a note to clients.
Investors’ concerns that Saudi Arabia may end its four-year oil-production alliance with Russia also weighed on prices, which are down 16% this year. The Saudi kingdom, Kuwait and the United Arab Emirates held talks to discuss a possible joint output cut of as much as 300,000 barrels a day, The Wall Street Journal reported Friday.
“Any break up of the cartel or stop to what OPEC endeavors to achieve will be negative for markets,” said Robert Montefusco, a broker at Sucden Financial.
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Traders are scrambling to assess the impact of new virus cases in Italy, where some 50,000 people were placed under quarantine over the weekend. In early February, Italy canceled all flights to and from China, but that didn’t stop the arrival of the virus as people weren’t restricted from connecting to Italy with stopovers in other countries.
“If you’re concerned about Europe, you’ll have flying patterns in the Atlantic basin getting disrupted and less travel between the U.S. and Europe,” said Olivier Jakob, managing director at Switzerland-based consulting firm Petromatrix. “You’ll have a global jet fuel demand problem.”
The price of gold, meanwhile, gained 2.4% at $1,689.10 a troy ounce, its highest price since late 2012, as investors flocked to haven assets such as precious metals and currencies like the Japanese yen.
— Caitlin Ostroff contributed to this article.
Write to David Hodari at David.Hodari@dowjones.com
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