Oil falls below $ 60 in light of concerns about demand caused by Chinese virus

UNITED STATES (OBSERVATORY NEWS) — Oil prices continued to drop on Monday, falling below $ 60 for the first time in nearly three months, as the number of deaths from the Coronavirus rose in China and more companies were forced to close, raising expectations of slowing oil demand.

By 1128 GMT, Brent crude fell $ 1.95, or 3.2 percent, to $ 58.75 a barrel, its lowest level since late October, marking the largest decline in the session since January 8.

US crude fell $ 1.77, or 3.3 percent, to $ 52.42.

Global stocks also retreated as investors became increasingly concerned about the acceleration of the crisis. The demand for safe havens, such as the Japanese yen and Treasury bonds, was strongly boosted.

The death toll from the Corona virus rose to over 80 and the Chinese government extended the lunar New Year holiday to February 2, in an effort to keep as many people as possible in homes to prevent the virus from spreading more widely.

The rapid spread of the virus has fueled fears of slowing oil demand and has fueled speculation that OPEC and its allies, including Russia, the group known as OPEC +, will consider production cuts.

Saudi Arabia and the United Arab Emirates, allies of the Organization of Petroleum Exporting Countries (OPEC), sought to reduce the impact of the virus on Monday, with Riyadh, the organization’s largest producer, saying the group could respond to any changes in demand.

Saudi Energy Minister Prince Abdulaziz bin Salman said he was confident of containing the new virus.

He added that what is happening in the markets “is mainly driven by psychological factors and the very pessimistic outlook adopted by some parties in the market, even though its impact (the virus) on global demand for oil is very limited.”

“Such pessimism occurred in 2003 during the crisis caused by the spread of the SARS virus, and it did not result in a significant decrease in oil demand,” Prince Abdulaziz said.

The OPEC + group, which includes Russia and other producing countries, is slashing oil supplies to support crude prices for nearly three years, and on January 1 they agreed to cut production by 500,000 bpd to 1.7 million bpd until March.


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