Adedapo Adesanya
By Adedapo Adesanya
With over 2,800 cases of the Wuhan coronavirus confirmed, oil prices continued steady declines, falling to its lowest in three months as demand for the commodity tumbles, spurred by restrictions placed on travel and fear of further spread.
With this, the international benchmark futures, Brent Crude plunged on Monday morning by 2.27 percent or $1.36 to trade at $58.60 per barrel, while the US West Texas Intermediate (WTI) fell to $52.90 per barrel after dropping by 2.38 percent equivalent to $1.29.
Prices of the commodity have been at the lowest since October last year as the escalating virus is impacting on demand especially in a market faced by excess supply, causing prices to fall as demand drops with preventive measures such as ban on travel making the outlook worse.
One of the members of the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia, on Monday, through its Energy Minister Prince Abdulaziz bin Salman Al-Saud, said they were watching developments in China and expressed confidence that the new virus would be contained.
“Such extreme pessimism occurred back in 2003 during the SARS outbreak though it did not cause a significant reduction in oil demand.
“The current impact on global markets, including oil and other commodities, is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” he said in a statement.
He also assured that the kingdom and other members of the oil cartel, along with producers in a group known as OPEC+, had the capability to respond and steady the oil market if needed.
OPEC+, which includes Russia and other producers, has been withholding supply to support oil prices and recently increased its agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd through March.
There has, however, been a new source that with this new development, the cartel might extend the cut throughout the whole year to play its part in bringing balance to demand and supply.
According to market analysts last week, global oil demand may slip by 260,000 barrels a day this year and could cut almost $3 from the price of a barrel of crude, meaning that Brent could fall as far as $57 per barrels this week which could be worsened by a rise in US crude inventories.
