TOKYO (Reuters) – Oil prices fell around 1% on Friday, pressured by growing worries about fuel demand as a coronavirus epidemic spread further beyond China, and as major crude producers appeared to be in no rush to cut output to buttress the market.
FILE PHOTO: Drilling rigs operate at sunset in Midland, Texas, U.S., February 13, 2019.REUTERS/Nick Oxford/File Photo
Brent crude LCOc1 was down 64 cents, or 1.1%, at $58.67 a barrel by 0703 GMT, while U.S. crude CLc1 dropped 54 cents, or 1%, at $53.34 a barrel.
South Korea’s fourth-largest city has become the latest virus hotspot, with streets abandoned and residents staying indoors after dozens of people were infected in what authorities described as a “super-spreading event” at a church.
Singapore and Japan are on the cusp of recession and the epidemic will be a major focus of talks at a meeting of G20 finance leaders on the weekend.
In China itself, the world’s biggest importer of crude oil, new cases also rose on Friday from the day before even as Beijing presses on with efforts to contain the spread that has largely paralyzed the world’s second-biggest economy.
“I think there is a lot of reason for caution right now, as the impact of coronavirus on demand is still unclear,” Stratfor oil analyst Greg Priddy said by email.
“If it begins to look like the impact will be modest, that could affect Russia’s decision at the March 5-6 OPEC+ meeting on whether they are willing to endorse a further cut,” he added.
Russian Energy Minister Alexander Novak said on Thursday that global oil producers understood that it would no longer make sense for the Organization of the Petroleum Exporting Countries (OPEC) and its allies to meet before their gathering.
The grouping, known as OPEC+, has been withholding supply from the market to support prices for several years now and many analysts expect an extension or deepening of the restrictions on production.
Moscow has said it will disclose its stance in the coming days.
“We still believe that the market is likely to trade lower from current levels, given the scale of the surplus over the first half of this year,” ING Economics said in a note.
Adding to pressure on oil prices was the strength of the U.S. dollar as investors looked for safe havens. A stronger greenback typically makes oil more expensive as the commodity is usually priced in dollars.
Prices were fazed by tensions in the Middle East after Saudi Arabia said on early Friday it had intercepted and destroyed several ballistic missiles launched by Houthi militia toward Saudi cities.
In the United States, crude stockpiles rose for a fourth week last week, although less than analysts had forecast. Gasoline and distillate inventories continued recent declines.
(GRAPHIC: U.S. petroleum inventories – here)
Reporting by Aaron Sheldrick; Editing by Kenneth Maxwell, Richard Pullin and Kim Coghill