By Adedapo Adesanya
Brent Crude continued its downward trajectory early on Thursday, falling $62 per barrel, less than the $63 forecast for the year 2020. The International benchmark crude had been on the steady decline following series of activities that have shaken the global market this month.
Beginning the year was the United States-Iran conflict, which after drove prices as high as $70 per barrel but subsided after the US said it was not going to retaliate the missiles launched by Iran on its bases in Iraq, which it said could devastate oil supply. The United States had killed the most respected military chief in Iran, General Qassem Soleimani.
Also, the Phase One US-China trade agreement signed on January 15 did not help boost the market as expected, while there was also the threat of oversupply which could nip demand as the world’s faces over one million barrels surplus oil.
The latest development affecting demand now is the spread of a respiratory virus from China, which observers said may lower fuel demand if it affects economic growth as transportation, a major drive of the economy may see less activity because of cautionary movement.
Since the outbreak, hundreds have been infected and health authorities around the world are on red alert for more outbreaks. There are more than 500 confirmed cases and 17 people have died.
Brent crude futures were down 84 cents, or 1.33 percent, to $62.37 per barrel as at the time of this report (9:30am Nigerian Time) continuing over 2 percent drop reported by Business Post at the previous session on Wednesday.
Likewise, the US West Texas Intermediate (WTI) futures were trading down 89 cents, or 1.57 percent, to $55.85 per barrel recording the lowest point in over six weeks.
Latest reports about the coronavirus which broke out in Wuhan, a Chinese city of 11 million people, state that the city has temporarily shut down its public transport as it tries to halt the outbreak of a new strain of virus. The respiratory illness has spread to other parts of China, with some cases in other countries including the US.
This is a big blow to oil prices as demand will slow even as supply rises, with the latest industry data showing that the US crude inventories rose last week by 1.6 million barrels instead of expected drops, according to the American Petroleum Institute (API).
Coronaviruses are common among animals but some of them can jump species, which is what happened with the SARS virus, to which the new one is related. Once it does jump species, the virus can be passed from human to human.
Dipo Olowookere