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.