Oil Falls As Coronavirus Hits Chinese Crude Demand

Oil prices fell on Monday to their lowest in more than a year, dragged down by worries about lower demand in top crude importer China after a new coronavirus outbreak spread from there to around 20 other countries.

Brent crude was at $56.26 a barrel by 0926 GMT, down 36 cents. Prices dropped by more than a $1 earlier in the session to $55.42, the lowest since January 2019.

U.S. West Texas Intermediate (WTI) crude fell 5 cents to $51.51 a barrel, after earlier hitting a session low of $50.42, the lowest since January 2019.

On the first day of trade in China after the New Year holiday, investors erased $393 billion from China's benchmark stock index on Monday, sold the yuan and dumped commodities as fears about the virus dominated the markets.

Iranian Oil Minister Bijan Zanganeh said the spread of the coronavirus had hit oil demand and called for an effort to stabilise oil prices.

"The oil market is under pressure and prices have dropped to under $60 a barrel and efforts must be made to balance it," Zanganeh said.

He said Iran would agree to holding earlier OPEC meeting if the rest of the group's members agreed to oil production cuts. OPEC and its allies, a group know as OPEC+, are considering meeting in February instead of March.

Joint Technical Committee (JTC), made up of members of the Organization of the Petroleum Exporting Countries and other producers, is scheduled to meet in early February to assess the virus impact, OPEC+ sources said.

"The market needs assurances that the supply/demand equation remains in balance for prices to hit a floor. This suggests a commitment from OPEC not just to extend oil supply cuts, but even implement deeper ones beyond March," said FXTM analyst Hussein Sayed.

As the coronavirus outbreak hit fuel demand in China, Sinopec Corp, Asia's largest refiner, told its facilities to cut throughput this month by around 600,000 barrels per day.

Independent refineries in Shandong province, which collectively import about a fifth of China's crude, also slashed output by 30% to 50% in just over a week, executives and analysts said.

"Clearly travel restrictions and the extended shutdown of large parts of the Chinese industrial sector have weighed on oil demand and this is reflected in the weakness that we are seeing in the ICE Brent time spreads," said ING analyst Warren Patterson.

The premium of the first-month Brent contract to the second-month contract narrowed to 9 cents a barrel on Monday from 70 cents a month ago, indicating that traders are not concerned about supply tightness because of the demand impact of the coronavirus.

(Reuters)