Brent crude, the international benchmark, fell $1.79 a barrel, or 2.95%, to $58.90 per barrel by 0903 GMT, having earlier fallen more than 3% to its lowest level in almost three months.
West Texas Intermediate also fell, down by $1.63, or 3%, at $52.55. Oil prices last fell below $60 on November 1.
Following the developments in the Persian Gulf region, including the killing of Iranian General Qasem Soleimani, the price of Brent crude oil reached $70 per barrel.
A senior analyst of 'Uralsib', Alexei Kokin, speaking to Vestnik Kavkaza, linked the decline of Brent prices with the spread of China's coronavirus. "Traders recalled the experience of a previous outbreak of a similar disease - SARS in the early 2000s - worrying that Chinese consumption of petroleum products would not reach the rate predicted by international analysts in 2020," he explained.
"At the same time, an important difference from the SARS case in 2003 is that back then the market responded only after the WHO announcement of the global threat, but now traders are already reacting negatively. On the other hand, such quick reaction is understandable: no one can be sure that quarantines restricting the consumption of petroleum products will end soon. In fact, they can last for several months, significantly affecting the growth in demand in China," Alexei Kokin pointed out.
Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, agreed with Kokin, stressing that the reaction of the Chinese authorities affected the market the most. "The Chinese government's actions of imposing quarantine on many cities are extraordinary and completely unexpected for the market. These measures are already affecting the Chinese economy, we can expect the Chinese GDP will lose several tens of percentage points," Belogoryev explained.
He also clarified that the sharp drop in flights had the most significant impact on the market, it was also affected by restricted road traffic, but to a lesser extent.
