Oil tumbles for the sixth day as Coronavirus sends panic through oil markets

After a 2% dip on Monday, oil fell on Tuesday morning
for the sixth session, extending losses as China continues to battle the Coronavirus
that has sent panic through commodities markets. Oil-producing nations have raised
the alarm over dwindling demand on crude as most industries in one of the
largest consumers of the commodity, China, remain closed.

After reaching a three-month low yesterday, Brent crude further fell
0.3% or by 15 cents to settle at $59.17 at 0114 GMT. At the same time, the US West Texas
dropped 0.2% or by 12 cents to $53.02. The benchmark fell to $52.13, touching a
new low since October last year.

Several countries,
including the United States, continue to warn its citizens against travelling
to China or other affected areas as the reported death toll rises to 100 with
thousands feared to have contracted the virus.

Millions of
Chinese remain locked indoors bringing one of the most industrious nation’s commerce
sector to a standstill.

Oil stakeholders
are a worried lot that closed businesses, travel advisories, and other
restrictions will cause a fall in the world’s second-largest economy are likely
to dampen the demand for crude and related products, amid steady supply.

In a note, RBC
Capital Markets said that “jet fuel demand has already been negatively
impacted given our real-time observation of Chinese flight activity”.

As the number
of reported casualties in China soars, the virus has also been reported in several
other parts of the world, amid fears of a global outbreak.

In a week,
Brent has dipped by nearly $7 per barrel, a steep that is “100% down due to the
Coronavirus,” commodities expert Edward Marshall from Global Risk Management
said during an interview with the Wall Street Journal.

“I think
we’re close to peak hysteria, so yes the move is justified. We’re in full panic
mode.”

The Economist
Intelligence Unit said China’s GDP could be
slowed by 0.5 to 1 percentage points following the outbreak. Already,
the country’s GDP was expected to reduce to a three-decade low to below 6% in
2020. But according to a publication by Financial
Times, the S&P Global Ratings placed the virus’s impact on China at a
1.2%-point reduction in GDP.

Yesterday
the Saudi Crown Prince Mohammed Bin Salman Al Saud watered-down the worldwide
panic saying the outbreak has “very little impact” on global oil demand.
Well, whether that will be the case or not remains to be seen. For now, investors
may need to brace themselves for tougher times in the oil markets as long as business
operations in China remain at a standstill.