Oil slips for third day as virus fears outweigh supply cuts
LONDON: Oil slipped towards $56 a barrel on Tuesday, falling for a third day, as concerns about the spread of the coronavirus and its impact on oil demand outweighed OPEC output cuts and Libyan supply losses.
Crude fell almost four per cent on Monday, with other commodities also reporting losses while the US and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic.
Brent crude fell 25 cents to $56.05 a barrel by 1450 GMT. US West Texas Intermediate crude slipped 15 cents to $51.28.
“Oil prices are naturally feeling the full wrath of the coronavirus spread,” said Craig Erlam, analyst at brokerage OANDA, who added the $54 level for Brent was looking “vulnerable”.
South Korea aims to test more than 200,000 members of a church at the centre of a surge in coronavirus cases. The virus is also spreading in Europe and the Middle East.
Concern about the demand impact from the virus has pushed Brent down by almost $10 a barrel this year despite the shutdown of most of Libya’s output and a supply pact between the Organisation of the Petroleum Exporting Countries (OPEC) and allies.
Prices received further support as lawmakers based in areas of eastern Libya on Monday said that they would not participate for now in peace talks.
However, oil could come under more pressure from the latest U.S. supply reports.
Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute, is due at 2130 GMT.
Potential support for prices could also come from OPEC and allies including Russia, which are considering whether to curb output further. However, scepticism is growing about the chance of further action.
“Doubts are emerging about the willingness of OPEC+ to extend and expand the necessary production cuts,” said Commerzbank analyst Eugen Weinberg. The producers are due to meet in Vienna over March 5-6 to decide policy.
Saudi Arabia’s energy minister on Tuesday said OPEC+ should not be complacent about the coronavirus. But Russia, key to any deal, has yet to announce its position on further curbs.
Published in Dawn, February 26th, 2020