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Oil falls for sixth day as China virus raises global growth, demand concerns

Published 28/01/2020, 04:45
© Reuters. An oil pump is seen just after sunset outside Saint-Fiacre
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By Aaron Sheldrick

TOKYO (Reuters) - Oil futures fell for a sixth session on Tuesday as the spread of a new virus in China and several countries raised concerns about a hit to economic growth and oil demand.

Brent crude (LCOc1) was down 37 cents, or 0.6%, to $58.95 at around 0348 GMT, after touching a three-month low on Monday at $58.50, as the virus outbreak triggered a global sell-off in riskier assets.

U.S. West Texas Intermediate (CLc1) was down 29 cents, or 0.6%, at $52.85, after slipping to its lowest since early October in the previous session at $52.13.

The United States warned against travel to China and other countries put out advisories as the death toll from the spreading coronavirus outbreak rose to more than 100 people and left millions of Chinese stranded during the biggest holiday of the year.

Oil investors are concerned travel advisories, other restrictions and any sizable impact on growth in the world's second-biggest economy and elsewhere will dampen demand for crude and its products, amid plentiful supply.

"The near-term potential of a nationwide travel shutdown is high," said Ian Bremmer, president of Eurasia Group, a political and market risk consultancy.

(Graphic: Map showing places with confirmed cases of 2019-nCoV IMG, https://graphics.reuters.com/CHINA-HEALTH-MAP/0100B589312/coronavirus-map.jpg)

Barclays (LON:BARC) said oil prices could be $2 below its forecasts of Brent to be $62 a barrel over 2020 and $57 a barrel for WTI.

The bank expects the grouping known as OPEC+ to take further steps to support the market when it meets in March if demand lags its forecast of between 600,000 and 800,000 barrels per day (bpd) in the first quarter of 2020.

"While it remains to be seen how quickly the spread of the virus is contained, experience from the 2003 SARS outbreak suggests demand worries are likely overdone," the bank said.

The Organization of the Petroleum Exporting Countries (OPEC), has been trying to play down the fallout from the virus, while Saudi Arabia, its de-facto leader, said on Monday the group could respond to any changes in demand.

OPEC and producers including Russia, known as OPEC+, have been cutting supply to support oil prices for nearly three years and recently agreed to withhold a further 500,000 barrels bpd to 1.7 million bpd through March.

© Reuters. An oil pump is seen just after sunset outside Saint-Fiacre

Underlining the supply concerns, a Reuters poll forecast U.S. crude stockpiles to have risen last week.

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