Oil prices fell to their lowest in more than a year on Wednesday after hundreds of new coronavirus cases reported in Europe and the Middle East stoked fears that energy demand would decline, and on concerns that the virus could spread across the United States.
Brent crude settled at $53.43 a barrel, shedding $1.52, or 2.77 per cent, while U.S. West Texas Intermediate (WTI) crude settled at $48.73 a barrel, down $1.17, or 2.34 per cent. Earlier in the session, both benchmarks hit their lowest since January 2019, with Brent sinking to $53.03 a barrel and WTI dipping to $48.30.
Oil followed equities lower after reports that 83 people were being monitored in New York for possible coronavirus exposure.
“Every time a headline comes out, especially one regarding new cases in the U.S. such as New York, that comes in and forces additional selling and pushes normal fundamental input to the sidelines,” said Jim Ritterbusch, president of Ritterbusch and Associates.
First cases of the virus were confirmed in countries including Greece, Georgia and Brazil, while authorities enacted more travel restrictions and quarantines across multiple continents.
The U.S. heating oil crack reached its lowest since 2017, reflecting reduced diesel demand due to the virus spread.
Prices briefly turned positive after the U.S. government reported a drop in gasoline inventories last week. Crude stocks grew by 452,000 barrels to 443.3 million barrels, the Energy Information Administration said, which was less than the 2-million-barrel rise analysts had expected.
“It’s still all about the virus here,” said Bob Yawger, director of energy futures at Mizuho in New York. “It’s going to be hard for risk assets to gather momentum.”
Goldman Sachs cut its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its Brent forecast to $60 a barrel from $63.
Authorities around the world battled to prevent the spread of coronavirus, which has now been found in at least 30 countries.
The World Health Organization’s (WHO) chief said while the sudden rise in novel coronavirus cases was “deeply concerning,” the virus could still be contained and did not amount to a pandemic.
U.S. President Donald Trump said he will hold a news conference on the coronavirus at 6 p.m.
Germany’s economy is nearing stagnation due to the outbreak, the DIW economic institute said on Wednesday.
The market was also watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.
OPEC+ are due to meet in Vienna over March 5-6.
“Yet there is no guarantee that buyers will emerge out of the woodwork even if OPEC+ further tightens the oil spigots,” said Stephen Brennock of oil broker PVM.
The International Energy Agency’s (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday.