Oil falls as coronavirus cases surpass SARS total
Oil prices on Thursday fell on concerns over the potential economic impact of the coronavirus that continues to spread worldwide, while the market also considered the possibility of an early OPEC meeting.
Brent crude was down 90 cents, or 1.50 per cent, at $58.91 per cent a barrel by 1447 GMT, having risen 0.5 per cent on Wednesday. U.S. crude was down 71 cents, or 1.33 per cent, at $52.62 after dropping 0.3 per cent in the previous session.
Infection from China’s coronavirus spread to over 8,100 people globally, surpassing the total from the 2002 to 2003 SARS epidemic in a health crisis forecast to deal a heavy blow to the world’s second-largest economy.
Countries have started isolating hundreds of citizens evacuated from the Chinese city of Wuhan to stop the spread of an epidemic that has killed 170 people.
Prices have steadied in recent days at three-month lows as investors tried to assess what economic damage the virus might inflict and its impact on demand for crude oil and its products. However, the rising death toll from the virus and its spread has again turned screens red, with global equities falling.
The MSCI world equity index, which tracks shares in 49 countries, fell 0.5 per cent as European shares followed Asian indexes down.
Tamas Varga of PVM Oil brokerage said virus-related demand worries have longs running for the exit and the first half of the year has always been rather bearish as the call for OPEC oil is traditionally weak.
“Now the question is how much the second-half oil balance, which looked relatively healthy, will be impacted. “We can expect a decent downward revision in Chinese GDP growth this year and this should have a profound negative impact on Chinese and global oil demand estimates,’’ Varga said.
The World Health Organisation’s Emergency Committee is set to meet later to reconsider whether the virus should be considered a global emergency. Major multinationals are closing operations in China and airlines around the world are suspending or reducing direct flights to the country as governments issue travel warnings and passenger numbers drop.
“The only thing that can change the current trend is an emergency OPEC meeting,’’ said Olivier Jakob of consultancy Petromatrix.
On Wednesday, Algeria’s Energy Minister, Mohamed Arkab, said it was very possible that an OPEC meeting could be advanced to February instead of the scheduled meeting in March.
“The Libyan outage is not providing much of a floor. “Only an additional OPEC cut could change things,’’ Jakob said. However, ING cautioned that outages in Libya, where production has been steadily declining amid a blockade, should not be discounted.
“If these (Libya) losses persist, it would be enough to swing the market into deficit this quarter,’’ ING said in a note. The bigger than expected build in U.S. crude oil inventories recently also kept pressure on prices. “Crude stocks rose by more than seven times market expectations,’’ the U.S. Energy Information Administration (EIA) said on Wednesday.