(Reuters) Crude prices sank more than 2% on Friday and Brent logged its biggest weekly decline in more than a year as concerns that a coronavirus will spread farther in China, the world’s second-largest oil consumer, curbing travel and oil demand.
The virus that has killed 26 people and infected more than 800 has prompted the suspension of public transport in 10 Chinese cities, while cases of infection have been found in several other Asian countries, France and the United States.
Brent crude LCOc1 settled at $60.69 a barrel, down $1.35, or 2.2%. The global benchmark fell 6.4% this week, its biggest weekly loss since Dec. 21, 2018.
U.S. crude futures CLc1 ended at $54.19 a barrel, shedding $1.4, or 2.5% on Friday and clocking a 7.4% weekly decline, their largest since July 19.
“It all about the coronavirus all the time, and we’re not getting signs that things are getting any better,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Health authorities fear the infection rate could accelerate over the Lunar New Year holiday this weekend, when millions of Chinese travel.
Experience with previous outbreaks such as SARS in 2003 and MERS from 2012 suggests the economic impact of an epidemic is relatively small. However, hedge fund positioning in oil has become lopsided, with bullish positions outnumbering bearish ones, leaving the market vulnerable to any disappointing news about consumption, said John Kemp, a Reuters market analyst.
Money managers increased ICE Brent crude oil futures and options contracts by 2,828 contracts to 428,990 for the week to Jan. 21, a 15-month high, while the speculator group raised its combined U.S. crude futures and options positions by 6,811 contracts to 274,347 during the period.
The latest U.S. rig count data, an indication of future supply from the world’s largest crude producer, did little to support oil prices as energy firms added oil rigs for a second consecutive week.
Also, the U.S. government’s latest supply report on Thursday showed gasoline stockpiles grew for an 11th consecutive week to a record high.
“It’s difficult to get constructive (about) the oil market until we see more declines in world inventory,” said Andy Lipow, president of Lipow Oil Associates in Houston.
Oil inventories in the wider industrialized world are above the five-year average, according to OPEC figures, which analysts say is limiting the impact of supply losses.
The prospect of further steps by the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, could offer support going forward. OPEC+ has been mostly limiting supply since 2017 and on Jan. 1 deepened a cut in output.
Source: Reuters
