Oil prices hit near four-month lows on Monday with leading crude benchmark Brent slipping beneath the key $60 per barrel support mark amid the worsening risk to global markets from China's spreading coronavirus
WASHINGTON (Pakistan Point News / Sputnik - 27th January, 2020) Oil prices hit near four-month lows on Monday with leading crude benchmark Brent slipping beneath the key $60 per barrel support mark amid the worsening risk to global markets from China's spreading coronavirus.
Brent, the London-traded global benchmark for crude oil, was down $1.23, or 2.1 percent, at $58.66 per barrel by 10:30 a.m. EST (15:30 GMT). It fell to $57.74 earlier, its lowest since October 8.
New York-traded West Texas Intermediate (WTI), the benchmark for US crude, was down 97 cents, or 1.8 percent, at $53.22 per barrel. It sunk to $52.16 earlier, also the lowest level since October 8.
"We are still in a selloff that is no doubt driven by systematic selling, CTA liquidation and probably a lot of blood-thirsty selling," Scott Shelton, energy futures dealer at the ICAP brokerage in Durham, North Carolina.
CTA refers to Commodity Trading Advisors while also is market lingo for algorithmic, or computer-driven, trading models.
Risk aversion triggered by the coronavirus has dimmed oil's fortunes drastically after a 35 percent gain for WTI in 2019 and 24 percent for Brent.
Brent is on track to finish January down 11 percent for its sharpest slide since May. WTI is set to lose nearly 13 percent on the month for its worst performance since December 2018.
Feared to be as bad as the Chinese-originated SARS health contagion that caused major market disruptions in 2003, the coronavirus has so far killed at least 80 people and infected nearly 3,000 in China, prompting Chinese authorities to lock down more than 55 million people.
China is the world's second largest economy, consuming more than 9 million barrels per day of oil last year, or almost 90 percent of the equivalent of Saudi production. The longer China takes to recover from the coronavirus, the harder the impact will be on oil demand and prices, say analysts.
Saudi Energy Minister Abdulaziz bin Salman, who's also the most powerful figure in the Organization of the Petroleum Exporting Countries, sought to downplay the crisis on Monday, calling the coronavirus a transient risk that had been overblown.
"Psychological factors and extremely negative expectations adopted by some market participants" were pushing oil prices down despite the virus's "very limited impact on global oil demand," Abdulaziz said.
But S&P Global Platts analyst Claudia Galimberti says the outbreak has already downed demand for 200,000 barrels of refined oil products in China.
Wall Street investment bank Goldman Sachs said last week that it anticipated a 260,000-barrels-per-day negative shock to global oil demand on average, including a 170,000-bpd loss of jet fuel demand, from the coronavirus.
Switzerland-based oil risk consultancy PetroMatrix has termed the virus the "Black Swan event of 2020," likening it to global contagions like the 1997 Asian financial crisis, the 2000 dotcom crisis, the 2001 attacks on the US and the 2008 global financial crisis among others.