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Oil prices slide for fifth day to lowest in a year as virus fears grow

Business

NEW YORK (Reuters) – Oil prices plunged more than 4% on Thursday, down for a fifth day to their lowest since January 2019 as more new coronavirus cases outside China fed fears of a pandemic that could slow the global economy and dent demand for crude.

Brent crude LCOc1 was down $2.29, or 4.3%, at $51.14 a barrel at 10:31 a.m. ET (1531 GMT), just off the session low of $51.13 a barrel. West Texas Intermediate (WTI) futures CLc1 fell by $2.60, or 5.3%, to $46.13, the lowest since January 2019.

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

“The ‘optics’ of the market look poor, though it’s interesting to me that the Chinese Teapot (refiners) were returning as the growth of the virus within China was slowing,” said Scott Shelton, energy broker with ICAP in Durham, North Carolina.

“It makes me think that the downside here now moves from crude to products should the virus continue to grow outside of China as their rates return, exports surge and perhaps the rest of the market isn’t there to take it from them.”

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

U.S. gasoline futures RBc1 fell as much as 5.5% to $1.3747 a gallon, the lowest since late January 2019 while heating oil futures HOc1 tumbled as much as 3.6% to $1.4461 a gallon, the lowest since July 2017.

U.S. 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.

“Oil is in freefall 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 in New York.

“The first U.S. case of unknown origin has energy markets preparing that a prolonged deep drop in demand for crude is upon us”

The spread between December 2020 futures and December 2021 futures for both Brent and WTI, a popular trade, fell firmly into negative territory.

Both spreads CLZ0-Z1 LCOZ0-Z1 hit the biggest discount since January 2019, signaling the erosion in demand could lead to a period of oversupply through the end of this year.

“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 U.S. oil report was able to lend price support,” said PVM Oil Associates analyst Tamas Varga.

U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA said, less than the 2-million-barrel rise analysts had expected. [EIA/S]

The crude market is watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+ set to meet in Vienna on March 5-6.

Additional reporting by Noah Browning in London, Yuka Obayashi in Tokyo and Roslan Khasawneh in Singapore; editing by Jason Neely and David Evans