Oil prices fell on Thursday following surprise travel restrictions imposed by United States President Donald Trump in an attempt to halt the spread of coronavirus after the World Health Organisation described the outbreak as a pandemic.

The slump in oil is being compounded by the threat of a flood of cheap supply after Saudi Arabia and United Arab Emirates said they would raise output in a standoff with Russia.

Brent crude was down $2.01, or 5.6 per cent, at $33.78 by around 9:30am (GMT). US crude was down $1.77, or 5.4pc, at $31.21.

“Failure to stop a market-share war will fill global oil storage and Brent prices again will trade with a $20 handle by year-end,” said Robert Ryan, chief energy strategist at BCA Research.

The two benchmarks are down about 50pc from highs reached in January. They had their biggest one-day declines since the 1991 Gulf War on Monday after Saudi Arabia launched a price war.

Global shares also took a hit after President Trump said the US would suspend all travel from Europe as he unveiled measures to contain the coronavirus epidemic.

The surprise move is likely to mean a further drop in demand for jet and other fuels in an already battered oil market, although just how much is hard to quantify.

The six-month Brent contango spread from May to November widened to as low as $6.40 a barrel, a level not seen since February 2015.

Contango is where the futures price of a commodity is higher than the spot price, prompting traders to fill tankers with oil to store for later delivery.

As many await to see who will break first in the Saudi-Russian price war, Ehsan Khoman, head of MENA research and strategy at MUFG, said: “We believe that both sides have enough financial capacity and sufficiently divergent goals to sustain the oil price war for many quarters, not months.”

The US Energy Information Administration and the Organisation of the Petroleum Exporting Countries (Opec) have slashed forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.

“If the crisis persists for another two or three months, many companies will go bankrupt, especially those in the US energy sector which also have to deal with an oil price war,” said Hussein Sayed, chief market strategist at FXTM.

Weekly data on U.S. inventories showed minimal effects from the coronavirus pandemic so far. Crude stocks increased by 7.7 million barrels, but inventories of gasoline and diesel fell sharply, as refining runs remain at seasonally low levels.