Oil futures fell sharply Friday on fears the spread of the coronavirus in China elsewhere will undercut demand for crude which has seen prices already under pressure due to worries about a potential oversupply.
On Friday, China’s National Health Commission confirmed more than 800 cases of the coronavirus, an illness akin to severe acute respiratory syndrome, or SARS. So far, the death toll has risen to 26 from 17, according to the commission and state media. In the U.S., the Centers for Disease Control and Prevention confirmed a second case of coronavirus. Cases have also been reported in other countries, though the World Health Organization on Thursday said it was too early to declare a global health emergency.
“In the last few days the oil price has suffered, with four consecutive trading sessions in the red as investors are seeing growing chances – again – of oversupply for the next few months, particularly with US inventories rising earlier this week,” wrote Carlo Alberto De Casa, chief analyst, ActivTrades, in a Friday note.
West Texas Intermediate crude for March delivery CLH20, -2.37% was down $1.34, or 2.4%, at $54.25 a barrel on the New York Mercantile Exchange, after falling 2% on Thursday, marking its lowest finish since Nov. 29 for a front-month contract, according to Dow Jones Market Data. The U.S. benchmark is on track for a weekly fall of more than 7%.
March Brent crude BRNH20, -2.22% gave up $1.46, or 2.3%, to trade at $60.58 a barrel on ICE Futures Europe, following a nearly 2% skid in the previous session which took the contract to its lowest level since Dec. 3. The global benchmark is on track for a 6.7% weekly fall.
Crude remained lower after oil-field-services firm Baker Hughes said the number of U.S. oil rigs rose by three this week to 676.
China has restricted travel in and out of Wuhan, where the first cases of the coronavirus outbreak appeared last month, but a number of other cities also have limited travel.
The World Health Organization stopped short of declaring an international health emergency due to the coronaviruses spread but did describe the outbreak as a China emergency at gathering on Thursday.
“Moreover, there is some anxiety for the possible impact from Chinese flu, even if at this stage we cannot understand how this fear is justified and how it will impact on oil demand,” De Casa said.
Oversupply concerns, despite a disruption to Libyan oil production, have been additional worries for the investors of the commodity.
“The key, of course, for oil is to determine how quickly the quarantines will be lifted and whether this virus is really under control or does it continues to spread,” wrote Phil Flynn, senior market analyst at The Price Futures Group.
Worries about the Asian influenza come after China last week reported its slowest rate of economic expansion in years, contributing to fears about demand from the second-largest economy in the world.
In other energy trading, February gasoline RBG20, -3.07% fell 3.2% to $1.5225 a gallon, while February heating oil HOG20, -3.34% was off 3.4% at $1.73 a gallon. February natural-gas NGG20, -1.92% dropped 3.2% to $1.5098 per million British thermal units.