TMN - Crude

Oil Prices Plunge as China Virus Upsets Fuel Demand

Last Thursday, in the oil inventory report, prices tumbled to their lowest in seven weeks.

The decline of over 1% happened as worries regarding the spread of a respiratory virus from China may harm fuel demand.

Moreover, this will happen if it will impede economic growth in a mirror of the SARS outbreak almost 20 years ago.

On the other side, Brent crude futures inched down by 82 cents or 1.3% to trade at $62.39 per barrel.

Earlier, it edged down to its lowest since December 4 after plunging by 2.1% in the last session.

After that, the U.S. West Texas Intermediate (WTI) futures also dropped by 86 cents or 1.5% to $55.88 per barrel.

Previously, it has fallen to its deepest since December 3, while the contract tumbled by 2.7% on Wednesday.

Furthermore, in the factors affecting oil, the coronavirus has already killed 17 people. It is through respiratory illness since it has surfaced late last year in Wuhan.

The place is the home of 11 million individuals in central China. Almost 600 cases were confirmed.

Locking Down of the Wuhan

In addition, the city authorities have shut down the transport network. They also claim to the residents to not leave for them to avoid the infection spreading.


The chances for a deadly disease have reignited memories of the Sudden Acute Respiratory Syndrome epidemic in 2002-2003.


To add, the previous dilemma also began in China that damaged economic growth, leading to a slump in travel.


In a statement, ING Research said, “Downside demand risk due to the Wuhan virus appears to be a growing concern for the market. And understandably so, with any clampdown on travel likely to weigh on fuel (oil) demand.”


Meanwhile, overseas airlines, together with rail operators in Hong Kong and elsewhere, have initiated shutting down connections to Wuhan. The city is basically now in lockdown.


In a note, JPM Commodities Research noted, “We estimate a price shock up to $5 if the crisis develops into a SARS-style epidemic based on historical oil price movements.”


However, the U.S. bank sticks to its projections for Brent to an average of $67 a barrel in the first quarter along with $64.50 a barrel throughout 2020.


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