Oil is heading for the longest run of weekly losses since last May on fears that China’s coronavirus outbreak may dent demand amid plentiful global supplies, even as United States crude inventories unexpectedly declined.
Futures in New York are down 5.1 per cent this week as officials widened their travel ban beyond the epicentre of the outbreak.
S&P Global Ratings warned that the virus could hit Chinese consumption. Broader market sentiment was mixed, with mainland China shut for Chinese New Year holidays.
The fast-spreading virus is the latest challenge for a market that has been buffeted this year by geopolitical turmoil in the Middle East and North Africa, as well as the phase one trade deal between Beijing and Washington.
While the International Energy Agency said the world is “awash with oil”, a surprise 405,000-barrel decrease in US crude stockpiles offered some relief.
“The coronavirus has clearly taken many of the more fundamental issues off the market and is impacting sentiment,” said senior commodity strategist Daniel Hynes at Australia and New Zealand Banking Group in Sydney.
West Texas Intermediate futures is poised for a third weekly drop after closing at the lowest level since Nov 29 on Thursday.
Brent crude fell four cents to US$62, and is also set for a third weekly decline.
Goldman predicts that the virus may crimp global demand by 260,000 barrels a day this year.
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