Yahoo Finance Brent’s Worst Week in 13 Months As Oil Crashes on Coronavirus
By Barani Krishnan
By Barani Krishnan
Investing.com - Oil prices tumbled a fifth straight day on Friday, pushing Brent to its worst week in 13 months, as contagion fears over the new coronavirus led to fresh risk aversion in global markets.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down $1.15, or 2.1%, at $55.59 per barrel. Earlier in the session, WTI sunk to 53.88, its lowest since the week of Nov. 17.
London-traded Brent, the global crude benchmark, settled down $1.35, or 2.2%, at $60.69. Brent hit a seven-week low of $60.26 earlier, almost snapping the key $60 support.
For the week, WTI lost 5%. For January so far, U.S. crude was down almost 9%, putting it on track to its biggest monthly loss since the 16.3% decline in May.
In Brent’s case, the global crude benchmark lost 6.4% on the week, its worst since December 2018. Month-to-date, Brent was off by 8% for its biggest losing month since May.
“The Coronavirus remains a major issue for the market to buy this dip and I think that there can be additional selling seen,” Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C., said.
Likened to the Chinese-originated SARS health epidemic that caused major market disruptions in 2003, the coronavirus has killed 26 people so far, also in China. It has prompted the Chinese authorities to introduce travel restrictions across 10 cities, affecting up to 40 million people according to some reports, in the middle of the country’s most important holiday season, the Lunar New Year.
The Economist Intelligence Unit said in a report Thursday that the virus could shave between 0.5 to 1 percentage point off China’s gross domestic product growth this year against a baseline forecast of 5.9 per cent.
On the energy front, the outbreak has already downed demand for 200,000 barrels of refined oil products, estimated Claudia Galimberti of S&P Global Platts. In China’s Hubei province, where the disease was first noted, the shutdown of transportation has probably eliminated about 50,000 to 70,000 barrels a day of demand, Galimberti noted.
Separately, Goldman Sachs (NYSE:GS) said on Tuesday that it anticipated a 260,000-barrels-per-day negative shock to global oil demand on average, including a 170,000-bpd loss of jet fuel demand, from the 2019-nCoV. Its analysis was based on comparison with the 2003 SARS health epidemic, which shook global markets, including oil.
Switzerland-based oil risk consultancy PetroMatrix, founded by veteran trader/analyst Olivier Jakob, has termed the virus the “Black Swan event of 2020”. That puts it on par with global market disruption events like the 1997 Asian Financial Crisis, the 2000 Dot-com Crisis, the 2001 Attacks on the U.S., the 2008 Global Financial Crisis, the 2009 European Sovereign Debt Crisis, the 2014 Oil Market Crash and the 2016 Brexit.
Oil’s fortunes have nosedived after a 35% gain for WTI in 2019 and 24% for Brent. The market appeared to be on good footing just after the New Year began as U.S.-Iran tensions initially sent crude prices rallying. But that upside was quickly lost as calm returned to the Middle East, and oil bulls have had trouble since capitalizing even on supply blockades in major producing countries Libya and Iraq.
Adding to Friday’s dark mood in oil was data from industry firm Baker Hughes showing U.S. energy firms adding to oil rigs for a second straight week. There were 676 actively-operating oil rig counts now, up three from last week, the data showed, although that was still way below the 862 that operated a year ago.
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