Oil prices fell on Thursday on concern that the spread of a respiratory virus from China could lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago.
Brent crude futures were down $1.59, or 2.5%, at $61.62 a barrel by 1426 GMT, having touched their lowest since Dec. 4. They lost 2.1% in the previous session.
U.S. West Texas Intermediate futures fell $1.58, or 2.8%, to $55.85 after falling to their lowest since November. The contract declined 2.7% on Wednesday.
Two Chinese cities that were at the epicentre of a new coronavirus outbreak that has killed 17 people and infected nearly 600 were put in lockdown on Thursday as health authorities around the world scrambled to prevent a global pandemic.
The potential for a pandemic has stirred memories of the Sudden Acute Respiratory Syndrome outbreak in 2002-03, which also started in China and dented economic growth and caused a slump in travel.
“Fundamentals are really being driven by virus fears. On a technical basis, there’s been a fight over the past six sessions but oil finally broke the 200-day moving average when it closed below that level yesterday,” said Olivier Jakob, of consultancy Petromatrix.
With coronavirus cases detected as far as away as the United States, global stock markets also felt the effects of fears that the virus could spread further as millions of Chinese prepare to travel for the Lunar New Year.
Beijing said on Thursday that it had cancelled major public events, including two well-known Lunar New Year temple fairs, to curb the spread.
“We estimate a price shock of up to $5 (a barrel) if the crisis develops into a SARS-style epidemic,” JPM Commodities Research said in a note, citing historical oil price movements.
The U.S. bank maintained its forecast for Brent to average $67 a barrel in the first quarter and $64.50 throughout 2020.
Amid all the demand concerns, however, supply remains plentiful. The International Energy Agency (IEA) said this week that it expects a surplus of 1 million barrels per day in the first half of the year.
The market was eagerly awaiting data from the U.S. Energy Information Administration to confirm a rise in crude stocks after the American Petroleum Institute surprised the market by noting an increase of 1.6 million barrels last week.
In Brazil, crude output rose above a billion barrels in 2019, a first for the South American nation, the national oil regulator said on Wednesday.
China, meanwhile, released data on Thursday showing its gasoline exports rose by nearly a third last year thanks to new refineries.
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Source: Money Control
