Oil slumps most in 2 weeks as global virus spread quickens

LONDON: Oil slumped the most since Feb 3 as a risk-off mood blanketed Asian markets after the global spread of the coronavirus quickened over the weekend.

Brent futures fell as much as 3.3% in early Asian trading on Monday. Over the weekend, finance chiefs and central bankers from the world’s largest economies said they see downside risks to the global economy persisting as supply chains get disrupted from the deadly virus.

International Monetary Fund Managing Director Kristalina Georgieva said Saturday the outbreak had led the lender to cut its forecast for Chinese growth to 5.6% from 6% and to trim 0.1 percentage points from its global growth forecast, but that it’s also looking at more “dire” scenarios.

“We do not know what will be the next steps, indeed if the epidemic will turn to pandemic or not,” French Finance Minister Bruno Le Maire told Bloomberg TV in Riyadh. “But we have to be prepared and that is exactly what we decided today among the G-20 members.”

Drivers

  • Hedge funds are bracing for more trouble in the oil market, even after crude rebounded for a second week on hopes the coronavirus outbreak’s threat to economic growth is waning.
  • Saudi Arabia’s Energy Minister Abdulaziz bin Salman dismissed a report of a split from OPEC+ alliance as “nonsense,” Reuters reported.
  • Russia and Belarus traded views on how to settle a oil dispute that has threatened to disrupt transit to Europe since the beginning of the year.

Prices

  • West Texas Intermediate for April delivery dropped US$1.39 to US$51.99 a barrel on the New York Mercantile Exchange at 10.22am Sydney time.
  • Brent for April settlement fell US$1.62 to US$56.88 a barrel on the ICE Futures Europe exchange.