By Adedapo Adesanya
Into the second day of the new week, prices of oil have continued to fall, losing over $6 since an outbreak of coronavirus in the Wuhan city of China, with major oil futures pointing south as a result of precautions put in place.
With a total of over 80 deaths recorded so far, the Chinese government in an attempt to slow the spread of the virus, has announced travel curbs and quarantines, while companies in China have advised staff to work from home, and this is having a huge toll on the economy.
On Tuesday morning, the Brent crude futures extended losses by 0.51 percent or 30 cents to trade $58.27 per barrel, while the US West Texas Intermediate (WTI) shed a further 0.32 percent or 17 cents to trade at $52.97 per barrel, bringing prices to their lowest in three months.
The coronavirus was first identified on December 31 in the Chinese city of Wuhan and latest numbers show a total of 82 deaths, according to Chinese officials. It was also reported that there are at least 2,900 confirmed cases worldwide. The virus has now spread to 10 additional countries, including South Korea, Japan, the United States, and now in the African country of Ivory Coast, as a 34-year-old student was confirmed on Monday to be tested positive.
With the potential threat that this continued problem poses, the Organization of the Petroleum Exporting Countries (OPEC) and its allies have stated that it could respond to any impact on the oil market.
OPEC and other producers including Russia, known as OPEC+, have been cutting supply to support oil prices since 2017 and recently agreed to extend to a further 500,000 barrels per day (bpd) to 1.7 million bpd through March, and there has now been talks that there was a potential in the works.
Speaking on the issue, the cartel through its de-facto leader, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said that OPEC+ would step in to bolster prices if needed, adding that he was confident the Chinese and international authorities could contain the virus.
However, analysts believe that OPEC will need to quickly work on getting demand up as several factors which help prices such as a military blockade that stopped oil production in Libya as well as a surprise decline in US crude inventories last week were not enough to prop up prices.
There is also the threat of oversupply of the commodity with over 1 million barrels produced supplied in excess per day, which could be vary dangerous to prices even if the coronavirus is tackled.
Dipo Olowookere