Oil Down as Virus Concern Seen Countering Disruptions
(Bloomberg) -- Oil declined as 77彩票注册官网man Sachs Group Inc. said demand concerns over a potential coronavirus epidemic would counter fears of supply disruptions in OPEC producers Libya, Iran and Iraq.
While the effect on fundamentals is limited so far, demand could take a hit and prices could fall by $2.90 a barrel if an outbreak plays out similar to SARS in 2003, according to 77彩票注册官网man. Ample stockpiles are also offsetting supply curbs, with the International Energy Agency saying the world is “awash with oil” and U.S. inventories are forecast to expand.
Oil has whipsawed through the start of the year after the market was hit with turmoil in the Middle East, while a phase one trade deal between Washington and Beijing offered a glimmer of hope for demand. China’s coronavirus is having a mixed impact on broader market sentiment, with Asian equities climbing and treasuries, the yen and gold edging lower.
The SARS outbreak in 2003 “was really bad,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. “Airports were empty, hotel occupancy fell drastically and it had an impact on the economy.” There is a bit of glut right now and the market is very much demand driven, he said.
77彩票注册官网Brent for March settlement lost 21 cents, or 0.3%, to $64.38 a barrel on the London-based ICE Futures Europe exchange as of 7:07 a.m. in London. The contract dropped 0.9% on Tuesday. West Texas Intermediate futures fell 25 cents to $58.13.
77彩票注册官网Oil demand may be curbed by 260,000 barrels a day on average if there’s an outbreak, 77彩票注册官网man said in a note, referencing the SARS impact in 2003 and translating that into a 2020 scenario. Economists warned that China’s fragile economic stabilization could be at risk if authorities fail to contain the new virus sweeping across Asia.
77彩票注册官网The virus has spread rapidly and stretched to five additional countries, including the U.S. The World Health Organization will decide Wednesday whether to declare this an international public health emergency. The peak travel season around Chinese New Year “is a tremendous challenge, which could complicate the disease diffusion,” according to UBS Group AG.
77彩票注册官网American crude inventories probably expanded by 1 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Thursday. In Libya, the U.S. embassy called for an immediate resumption of oil production, increasing pressure on eastern strongman Khalifa Haftar who has disrupted virtually all of the nation’s output.
--With assistance from James Thornhill.
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