By Adedapo Adesanya
Oil prices fell more than 2 percent on Thursday as the global market faces fear as oil demand will be hit by the spread of the coronavirus outbreak in China.
The bearish performance for the Brent crude continued as it fell further around the $62 mark as it dropped 1.88 percent equivalent to $1.19 to trade at $62.02 per barrel.
Also, the US West Texas Intermediate (WTI) crude further moved down as it shed 2.03 percent or $1.15 to trade at $55.59 per barrel. This performance was the lowest settlement for the American futures since October last year.
Reports show that two Chinese cities were put on lockdown on Thursday as health authorities around the world scrambled to prevent a global pandemic. The coronavirus outbreak has killed 17 people and infected nearly 600.
China has banned travel in and out of Wuhan, where the first cases of the coronavirus outbreak appeared last month as there may be a widespread travel restriction, even followed by flight cancellations, reduction in regional travel and lower overall economic activity in China, the world’s largest importer of oil.
There was a level of support for oil as data showed that petroleum supplies from the US according to the Energy Information Administration (EIA) unexpectedly revealed that crude supplies fell by 400,000 barrels for the week ended January 17, meanwhile the American Petroleum Institute (API) reported a weekly supply rise of 1.6 million barrels.
There is also the concerns of oversupply affecting the market , despite a disruption to Libyan oil production due to conflict, and have led to additional worries for the investors of the commodity as the International Energy Agency (IEA) said it expects a surplus of 1 million barrels per day in the first half of the year.
This will be due to increase in US shale output, which he said will continue to influence oil and other energy products leading members of the Organization of the Petroleum Exporting Countries (OPEC) in December to extend the cuts on oil production by 1.7 million barrels per day as forecast show a monthly rise in US shale oil production of 22,000 barrels a day to 9.2 million barrels a day in February.
Meanwhile, with the escalation of the coronavirus cases detected as far as away as the United States, the market is now being tested as analysts believe that if the virus spreads further and hit travel and growth, demand for oil could fall by 260,000 per day.
Dipo Olowookere