Oil Stumbles on Renewed Fears of Virus Intensifying Beyond China
Oil declined the most in two weeks as shock waves from the spreading coronavirus triggered the first drop in U.S. business activity in seven years.
Crude futures fell as much as 2.5% in New York on Friday. China revised how it calculates infection totals for the third time this month, raising questions about data reliability. Virus cases spread in Japan, South Korea and the Middle East. Meanwhile, a key IHS Markit gauge of factories and service providers in the world’s largest economy dropped, sparking sell-offs in government bonds and equities.
“The market is hypersensitive at the moment,” says Bill Farren-Price, a director at consultant RS Energy Group. If the virus “continues to spread outside of China then the fear is we’ll see weak growth and demand from other economies as well.”
Oil has fallen 14% this year as China’s viral outbreak crippled industrial activity and transportation at a time when energy supplies already were abundant. The World Health Organization said if countries don’t respond strongly now, the spread outside China may become a wider threat.
The Organization of Petroleum Exporting Countries and its allies will meet in March as originally scheduled after efforts by Saudi Arabia to hold an emergency meeting failed to materialize amid resistance from Russia.
Saudi Arabia’s energy minister dismissed a Dow Jones report on Friday that Riyadh was considering a break from its four-year oil production alliance with Russia. Russia has remained noncommittal to an OPEC proposal for additional production cuts.
“Saudi Arabia needs the production cuts more than Russia,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “Russia will eventually come to the table in March and participate but Saudi Arabia will likely shoulder most of burden to get them to come on board.”
See also: Vitol Sees Oil Recovery This Year After Slump From Virus
West Texas Intermediate for April delivery fell 47 cents to $53.41 a barrel at 1:24 p.m. on the New York Mercantile Exchange.
Brent for April settlement declined 90 cents to $58.41 on the ICE Futures Europe exchange.
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— With assistance by James Thornhill, Grant Smith, and Saket Sundria
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