Oil Dives Past 13-month Low as Pandemic Fears Spread
Oil continued to plunge after closing at a 13-month low as more new coronavirus cases were reported outside of China, adding to fears the world is on the brink of a pandemic that will stunt economic growth.
Futures fell as much as 5.3% in New York on Thursday and headed for the worst weekly loss since 2014. Global stocks also tumbled, with the six-day slide pushing the S&P 500 and Dow Jones Industrial Average indexes down by 10% from all-time highs set this month.
Germany said the virus was likely at the start of an epidemic and Saudi Arabia halted religious visits. In addition to crude, diesel has also plummeted, with heating oil futures in New York trading at the lowest since July 2017.
“We’ve dived deeper into this well,” said Bob Iaccino, market strategist at Path Trading Partners. “Until the virus outbreak gets under control it’s going to be the driver of everything. We still don’t know the full effect on demand but it’s going to be terrible.”
U.S. data that showed a smaller-than-forecast increase in crude stockpiles failed to arrest the slide. Oil has fallen more than 24% this year as the virus hit a market already awash with supply. Investors are assessing whether the Organization for Petroleum Exporting Countries and its allies will be able to agree on deeper output cuts at a meeting in Vienna next week.
Oil could fall below $30 a barrel if OPEC+ fails to agree a production cut, Standard Chartered Plc analysts Emily Ashford and Paul Horsnell wrote in a report. Russia has so far resisted pressure from Saudi Arabia for an OPEC+ agreement to cut production further as the virus hits demand
West Texas Intermediate futures fell 4.7% to $46.45 a barrel as of 10:15 a.m. local time on the New York Mercantile Exchange.
Brent lost 3.5% to $51.54 a barrel on the ICE Futures Europe exchange.
Though prices have fallen, not all indicators are showing weakness. The April Brent contract, which will expire on Friday, is trading at a premium of about 60 cents to May, indicating supply tightness in the North Sea. That’s despite a nosedive in so-called time-spreads further down the futures curve, with the closely-watched December 2020-2021 differential at the weakest in more than a year on Thursday, highlighting the market’s demand concerns.