LONDON (Reuters) – Oil prices fell on Thursday 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.
FILE PHOTO: The sun sets behind an oil pump outside Saint-Fiacre, near Paris, France September 17, 2019. REUTERS/Christian Hartmann
Brent crude LCOc1 was down 90 cents, or 1.50%, at $58.91 a barrel by 1447 GMT, having risen 0.5% on Wednesday. U.S. crude CLc1 was down 71 cents, or 1.33%, at $52.62 after dropping 0.3% in the previous session.
Infection from China’s coronavirus spread to more than 8,100 people globally on Thursday, surpassing the total from the 2002-2003 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 on Thursday 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.
But the rising death toll from the virus and its spread have again turned screens red, with global equities falling. The MSCI world equity index, which tracks shares in 49 countries, fell 0.5% as European shares followed Asian indexes down.
“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,” Tamas Varga of PVM Oil brokerage said.
“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.”
The World Health Organisation’s Emergency Committee is set to meet later on Thursday 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.
Algeria’s energy minister Mohamed Arkab said on Wednesday 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,” Jakob said. “Only an additional OPEC cut could change things.”
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 last week 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.
(GRAPHIC: U.S. petroleum inventories – here)
Reporting by Aaron Sheldrick; Editing by Jan Harvey; Editing by Elaine Hardcastle and David Evans