Oil futures traded sharply lower Tuesday as concerns about the coronavirus and its impact on demand resurfaced, fueling a broader aversion to assets considered risky on Wall Street. Growing doubts that a group of global crude producers, particularly Russia, are inclined to reduce output further to stabilize prices also weighed on prices.
West Texas Intermediate crude for March delivery
lost $1.11, or 2.1%, to $50.94 a barrel on the New York Mercantile Exchange, while April Brent crude
fell $1.33, or 2.3%, to $56.34 a barrel on ICE Futures Europe.
“The risk-off tone was also driving oil on Tuesday, with WTI and Brent crude prices off by between 1.5%-1.8% amid fading hopes that OPEC and its allies will be able to agree to emergency production cuts to counter the deteriorating demand outlook,” wrote Raffi Boyadjian, senior investment analyst at XM in a Tuesday research note.
The decline comes after both grades last week booked their first weekly gains in six weeks, with WTI notching a 3.4% weekly rise, while Brent, the global benchmark, saw a 5.2% gain over the period, according to Dow Jones Market Data.
Crude oil traders have been waiting for signs that members of the Organization of the Petroleum Exporting Countries and other major producers like Russia — a group known as OPEC+ — will move forward a planned March meeting to sometime this month. However, Reuters, citing unnamed sources, reported that there are no indications that such a gathering will take place, heightening fears that the there isn’t sufficient will to dial back production further, in line with an advisory panel’s recommendation to shrink output by a further 600,000 barrels per day.
Russia, one of the largest exporters of crude, has been reluctant to reduce oil output further. OPEC+, is currently under an agreement to cut oil output by 1.7 million barrels per day, which ends at the end of March.
The slump in oil prices comes as the outbreak of COVID-19, the infection that reportedly originated in Wuhan, China last year, has sickened more than 72,000 people and killed more than 1,800, according to the most recent data out of China.
Commodity investors are concerned about the spread of the disease because it is expected to harm demand from China, the biggest importer of crude in the world. Infections elsewhere in the world could also harm global uptake of fossil fuels, producing a drag on prices.
Indeed, the International Energy Agency slashed its 2020 oil demand-growth forecasts by 365,000 barrels a day, a reduction of 30% to its previous forecast made in January, citing the impact of the outbreak of the novel coronavirus.
In other energy trading, March gasoline
was down 0.4% to $1.578 a gallon, after gaining 3.9% for the week, while March heating oil
lost 2.1% to $1.662 a gallon, following a 3.3% advance last week.
March natural gas
soared 5.9% to $1.945 per million British thermal units. The commodity suffered a loss of 1.1% for the week, and hit its lowest trade since March 2016.