LONDON – Oil prices slumped to their lowest in more than a year on Friday and were set for their steepest weekly fall in four years as the global spread of the coronavirus stokes demand fears.
Investors are increasingly worried about an economic slowdown weighing on oil demand as the virus spreads beyond its epicentre in China to more than 40 other countries.
The most active Brent crude contract for May LCOc2 was down $1.92 at $49.81 a barrel by 1503 GMT, its lowest since July 2017.
The front-month contract LCOc1 fell to a session low of $50.05, its cheapest since December 2018, and was heading for its biggest weekly fall since January 2016. It expires later on Friday.
West Texas Intermediate (WTI) crude futures CLc1 fell $2.19 to $44.90 a barrel. U.S. crude is set for a 16% fall this week, representing the sharpest weekly decline since December 2008.
“While oil prices are expected to remain volatile in the near term, we expect Brent crude oil to recover to $64 a barrel (in the second half of 2020) as the economic recovery, slowing U.S. oil production growth and additional OPEC production cuts tighten the oil market,” UBS analysts said in a note.
Oil was not the only market to slump. Coronavirus panic also sent global stock markets tumbling, compounding their worst week since the 2008 global financial crisis with losses amounting to $5 trillion.
Mainland China reported 327 new cases, the lowest since Jan. 23, taking its tally to more than 78,800 cases and almost 2,800 deaths. But as the outbreak eases in China it is surging elsewhere.
The number of affected countries and territories outside China stood at 55, with more than 4,200 cases and about 70 deaths.
Benchmark Brent crude’s slump of about 13% this week is likely to focus minds when the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, meet next week to discuss output.
Several key OPEC members are leaning towards a bigger than previously expected oil output cut, four sources with knowledge of the talks said.
Saudi Arabia, the biggest producer in OPEC, and some other members are considering agreeing a cut of 1 million barrels per day (bpd) for the second quarter of 2020, up from an initially proposed cut of 600,000 bpd, the sources said.
OPEC+ is due to meet in Vienna over March 5-6.
Saudi Arabia, which said it would continue to engage with Russia on oil policy, is reducing crude supplies to China in March by at least 500,000 bpd owing to slower refinery demand.
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