Oil Slides to a Three-Month Low on Virus Contagion Jitters
Oil tumbled as the market opened in Asia on fears China’s deadly coronavirus will crimp energy demand
(Bloomberg) -- Oil fell to the lowest since October as China’s deadly coronavirus crippled the world’s second-largest economy and threatened worldwide energy demand.
Futures shed 1.9% on Monday in New York. The coronavirus’s death toll climbed to at least 80 people and additional cases of infections underscored concerns that China has failed to contain the deadly virus despite its efforts to control the outbreak. China extended the Lunar New Year holiday by three days until Feb. 2, while companies in Shanghai have been asked not to start work until at least Feb. 9.
The virus is the latest upheaval for the oil market, which has been struggling with demand concerns for months. Investors are selling crude and other commodities amid a broad withdrawal from riskier assets and fears the virus will curtail fuel consumption as travel is restricted. U.S. gasoline futures touched an 11-month low in intraday trading.
Still, oil pared some of its earlier losses as Saudi Arabia assured markets that the world’s biggest crude exporter is closely monitoring the situation and its impact on oil markets.
“I think it’s relieving some of the pressure,” Michael Lynch, president of Strategic Energy & Economic Research Inc. The Saudis are signaling that once the impact of the virus is clearer, they’re “willing to re-balance the markets,” Lynch said.
Investors shrugged off an escalating crisis in Libya that could see the country’s output plummet to 72,000 barrels a day from 262,000 barrels according to National Oil Corp. Chairman Mustafa Sanalla.
“The market is in a free-fall right now,” said Mark Waggoner, president of Excel Futures Inc. “Unless Libya is a big disruption to supply, everyone is going to concentrate on China,” he said.
West Texas Intermediate for March delivery fell $1.05 to end the session at $53.14 a barrel at the New York Mercantile Exchange.
Brent futures lost $1.37 to end at $59.32 a barrel on the London-based ICE Futures Europe exchange, putting its premium over WTI at $6.18 a barrel.
The recent decline in prices could persist or worsen if the virus continues to spread, says Waggoner. “It’s going to get worse before it gets better. We need to see crude oil reach $50.50 before it becomes a buying opportunity again,” he said.
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--With assistance from Rakteem Katakey, Javier Blas, Saket Sundria and Aaron Clark.
To contact the reporter on this story: Jackie Davalos in New York at jdavalos10@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Catherine Traywick
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