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Crude futures dropped 2 per cent to three-month lows on Monday as the death toll from China’s coronavirus grew, curtailing travel and fueling expectations of slowing oil demand.

Brent crude settled at $59.32 a barrel, losing $1.37, or 2.3 per cent, its lowest since Oct. 21. U.S. crude settled at $53.14 a barrel, was down $1.05, or 1.9 per cent, its lowest since Oct. 2.

Global stock exchanges, which oil prices tend to follow, also sank as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and Treasury notes.

The death toll from the coronavirus rose to 81 and the Chinese government extended the Lunar New Year holiday to Feb. 2, trying to keep as many people as possible at home to prevent the virus from spreading further.

“This thing still in the process of rearing its ugly head and that’s why oil is taking this so hard because this could really turn into an acute drop in demand at least for a time,” said John Kilduff, partner at Again Capital LLC in New York.

The lockdown of a growing number of Chinese cities and canceled flights threatens one of the steadiest growth areas of global oil demand, with jet fuel accounting for about 15 per cent of demand growth in China, RBC Capital Markets said in a report.

However, worries over the easing of jet fuel consumption is currently confined to China, RBC said.

Saudi Arabia and the United Arab Emirates, allies in the Organization of the Petroleum Exporting Countries (OPEC), tried to play down the impact of the virus on Monday, with Riyadh, the de-facto OPEC leader, saying the group could respond to any changes in demand.

An OPEC source said there were “preliminary discussions” among OPEC+ for an extension of the current oil supply cuts beyond March, and a possible deeper cut was also an option, if there was a need, and if the China virus spread impacted oil demand.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud said he felt confident the new virus would be contained.

OPEC and its allies including Russia, a group known as OPEC+, has been withholding supply to support oil prices for nearly three years and on Jan. 1 increased an agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd through March.

Brent crude oil prices have dropped by almost a fifth since a spike in tensions between the United States and Iran briefly lifted prices above $70 a barrel on Jan. 8.

The losses since are in spite of a 75 per cent drop in output from Libya to less than 300,000 bpd due to an ongoing blockade of oilfields.

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