Oil futures dropped on Thursday, with U.S. prices logging their lowest settlement since early August, as worries rise over the potential economic impact from the continued spread of the coronavirus.
“Alarm bells are going off in global markets after the World Health Organization (WHO) is saying they deeply regret calling the outbreak of the coronavirus moderate,” said Phil Flynn, senior market analyst at The Price Futures Group, in a note. That’s “raising fears that the virus is much worse than official Chinese channels are telling us. If that fear permeates the public in other parts of the world, it could be a real risk to global economic growth.”
On Thursday afternoon, WHO declared that coronavirus is a public health emergency of international concern.
West Texas Intermediate crude for March delivery on the New York Mercantile Exchange fell $1.19, or 2.2%, to settle at $52.14 a barrel, after trading as low as $51.66. The settlement was the lowest for a front-month contract since Aug. 7, according to Dow Jones Market Data.
March Brent crude , which expires at Friday’s settlement, shed $1.52, or 12.5%, to $58.29 a barrel, for the lowest front-month contract finish since Oct. 8.
Chinese authorities on Thursday said more than 7,700 people have been infected, with at least 170 dead. World Health Organization officials expressed “great concern” over the virus’s spread outside of China.
“Assessing demand destruction in real time is difficult, and the market has clearly adopted a sell first, ask questions later approach to the coronavirus,” strategists at RBC Capital Markets wrote in a research note dated Thursday.
On Thursday, Tedros Adhanom Ghebreyesus, WHO’s director-general, said “our greatest concern is the potential for the virus to spread to countries with weaker health systems and which are ill-prepared to deal with it.”
“A number of international flights to China have been canceled and if this trend continues in the coming days and weeks it will likely only deepen demand concerns,” said Warren Patterson, head of commodities strategy at ING, in a note.
In recent days there have been suggestions that the Organization of the Petroleum Exporting Countries and their allies may be considering extending or increasing their current production cut agreement due to concerns about the virus’ impact on oil demand.
Saudi Arabia has opened talks about moving the OPEC+ meeting to early February from March, Reuters reported Thursday, citing four OPEC+ sources .
On Wednesday, WTI, the U.S. benchmark, ended lower, giving up earlier gains after government data showed a larger-than-expected climb in weekly crude inventories. WTI prices have now posted declines in seven out of the last eight trading sessions.
In other energy trading, February gasoline fell 2.4% to $1.4937 a gallon, while February heating oil lost nearly 3.8% at $1.6396 a gallon—the lowest finish since August 2017. The February contracts expire at the end of Friday’s session.
March natural gas fell 3.6 cents, or 1.9%, to settle at $1.829 per million British thermal units, marking another finish at the lowest since March 2016.
On Thursday, the U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 201 billion cubic feet for the week ended Jan. 24. That compared with a decline of 207 billion cubic feet forecast by analysts polled by S&P Global Platts. The market saw a withdrawal of 171 billion cubic feet in the same week last year and a five-year average draw for the period of 143 billion cubic feet, according to S&P Global Platts.