(Bloomberg) — Oil declined to a seven-week low on concerns that a deadly virus that’s spreading from China will crimp energy demand in a market already awash with supplies.
Futures lost more than 2% in New York on Wednesday. Goldman Sachs Group Inc. warned that global oil demand may slip by 260,000 barrels a day this year as a result of the respiratory virus that’s spread beyond China’s borders. If the 2003 SARS epidemic is any guide, this new outbreak could shave almost $3 from the price of a barrel of crude, the bank said.
“SARS dented demand due to decreased air traffic/traveling,” Michael Loewen, director of commodity strategy at Scotiabank, said in an email. “Could be something similar this time around again. And that could be a possible headwind for demand.”
West Texas Intermediate futures for March delivery fell $1.31 to $57.07 a barrel at 10:17 a.m. on the New York Mercantile Exchange. Brent for March settlement dropped $1.35 to $63.24 on the London-based ICE Futures Europe exchange.
“After the demand optimism we saw regained at the end of last year, we believe that much more aggressive demand worries are about to enter the market, at least in the short term,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA.
The market’s response to the halt of exports from OPEC member Libya has been muted as record U.S. production is forecast to expand already-swollen inventories. Separately, Kuwait plans to resume output at the Wafra field it shares with Saudi Arabia within weeks, ending a hiatus that’s lasted more than four years.
Oil has fallen more than 6% since the end of 2019 as geopolitical supply threats and a truce in the U.S.-China trade war failed to sustain optimism.
See also: Coronavirus Could Bite Commodities If SARS Is Any Guide: Chart
The peak travel season around Chinese New Year that begins this week “is a tremendous challenge, which could complicate the disease diffusion,” according to UBS Group AG.
–With assistance from James Thornhill and Saket Sundria.
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