Oil plunges to lowest level in nearly 14 months

London — Oil prices fell more than 2% on Thursday, plunging for a fifth day to their lowest since January 2019, as a rise in new coronavirus cases outside China fuelled fears of a pandemic that could slow the global economy and dent demand for crude.

Brent crude was down $1.15, or 2.2%, at $52.28 a barrel at 11.50am GMT. West Texas Intermediate (WTI) futures fell $1.04, or 2.1%, to $47.69 a barrel.

For the first time since the start of the coronavirus outbreak erupted in China, the number of new coronavirus infections outside the country exceeded new Chinese cases.

The spread of the virus to large economies including South Korea, Japan and Italy has raised concern that growth in fuel demand will be limited. Consultants Facts Global Energy forecast oil demand would grow 60,000 barrels per day in 2020, a level it called “practically zero”, due to the outbreak.

US President Donald Trump sought to assure Americans on Wednesday evening that the risk from coronavirus remained “very low”, but global equities resumed their plunge, wiping out more than $3-trillion in value this week alone.

“The negative price impact would intensify if the coronavirus were declared pandemic by the World Health Organisation, something that looks imminent,” said PVM Oil Associates analyst Tamas Varga.

“The mood is gloomy and the end of the tunnel is not in sight — there is no light ahead just darkness. Not even a refreshingly positive weekly US oil report was able to lend price support.”

Petrol stockpiles dropped by 2.7-million barrels in the week to February 21 to 256.4-million, the Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1-million barrels to 138.5-million.

US crude oil stockpiles increased by 452,000 barrels to 443.3-million barrels, the EIA said, which was less than the two-million-barrel rise analysts had expected.

The crude market is watching for possible deeper output cuts by oil cartel Opec and its allies including Russia, a group known as Opec+.

“Oil is in free fall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters,” said Edward Moya, senior market analyst at Oanda. “Expectations are growing for Opec+ to deliver deeper production cuts next week.”

Opec+ plans to meet in Vienna from March 5-6. 

Reuters