Oil prices fell to their lowest level since January 2019 on Monday on weaker Chinese demand in the wake of the coronavirus outbreak. CNBC reports in its article Oil drops 1.5% to 13-month low as weak Chinese demand weighs that traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped more than 20% from a peak in January after the spreading virus hit demand in the world’s largest oil importer and fueled concerns of excess supplies. Brent crude slipped $1.14, or 2%, to $53.33 per barrel, while U.S. West Texas Intermediate fell 75 cents, or 1.5%, to settle at $49.57 per barrel, its lowest settle since Jan. 7, 2019. That keeps both Brent and WTI in oversold territory for 13 days and 14 days, respectively, their longest bearish streaks since Nov. 2018.
The premium of the Brent front-month over the same WTI contract, meanwhile, fell to its lowest since August 2019 in intraday trade. “The concern remains that the wider markets have yet to reflect the full impact of the disruption,” said Saxo Bank commodity strategist Ole Hansen. “With China being the world’s most dominant consumer of raw materials, the impact continues to be felt strongly across key commodities and the world is facing the biggest demand shock since the 2009 global financial crisis.”
Beijing has orchestrated support for its companies and financial markets in the past week and investors are hoping for more stimulus to lift the world’s second-biggest economy.
Worries over supply were not alleviated on Friday when Russia said it needed more time to decide on a recommendation from a technical committee that has advised the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production by a further 600,000 barrels per day (bpd).
The group, known as OPEC+, has been implementing cuts of 1.2 million bpd since January 2019.
Algeria’s Oil Minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter.
Russia’s Energy Minister Alexander Novak said Moscow needed more time to assess the situation, adding that U.S. crude production growth would slow and global demand was still solid. “The lack of enthusiasm from the Russians to deliver an additional 600,000 barrels per day in deeper production cuts could prove cost in stabilizing prices in the short-term,” Edward Moya, senior market analyst at OANDA in New York, said in a report.
Oil traders also said they were concerned the proposed reduction would not be sufficient to tighten global markets as China’s state refiners have said they would cut refining throughput by about 940,000 bpd this month.
