Oil prices fell about 1% on Friday on renewed concerns about crude demand being pinched by the economic impact of the coronavirus outbreak, while OPEC and allied producers appeared to be in no rush to curb output.
The latest signs of infections outside the Hubei province epicenter in China spurred a selloff across financial markets, as G20 policymakers traveled to Saudi Arabia for talks on the global economy.
Brent crude LCOc1 tumbled as more than 2% at one point before settling down 81 cents, or 1.4%, at $58.50 a barrel. U.S. crude futures CLc1 settled 50 cents lower, or 0.9%, at $53.38.
Both benchmarks were on track for their second consecutive weekly rise, with Brent up 2% and U.S. crude rising 2.6%, as fears over the virus’ impact on demand eased earlier in the week and after a smaller-than-expected U.S. crude stock build.
“It’s safe to say that uncertainty (surrounding coronavirus) has returned with a vengeance,” said Ole Hansen, head of commodity strategy, Saxo Bank.
“We have to acknowledge that we’re dealing with the biggest demand shock since the financial crisis… Until we see China getting back to work, the virus will be the main focus.”
In the latest sign of the economic hit, U.S. business activity in the manufacturing and services sectors stalled in February.
Concerns over the virus have largely overshadowed risks to supply, including the latest blockade in Libya, said Edward Moya, senior market analyst at OANDA in New York.
The United Nations said ceasefire talks were back on track between forces fighting over Libya’s capital. Meanwhile, Yemen’s Houthis said they had struck facilities of Saudi oil giant Aramco in the Red Sea port of Yanbu.
OANDA’s Moya also pointed to signs the Organization of the Petroleum Exporting Countries (OPEC) was unlikely to cut supplies further.
Russian Energy Minister Alexander Novak said on Thursday that producers understood it would no longer make sense to meet before a planned gathering in March.
“Concerns the Saudis and Russians are struggling to agree on the appropriate response to the demand destruction the coronavirus has created,” were pressuring prices, Moya said.
“Markets are starting to doubt we’ll see the full 600,000 bpd in additional (OPEC+) cuts.”
In the United States, the oil rig count, an indicator of future production, rose for a third straight week. Drillers added one oil rig this week, bringing the total count to 679, the highest since the week of Dec. 20, energy services firm Baker Hughes Co said. REUTERS