Oil prices drop on fears of coronavirus slowing demand

Oil prices hit three-month lows on Monday as the death toll from China’s coronavirus reached 81, while several major Chinese cities remained in lockdown to contain the spread of the virus.

Brent crude dropped by 2.3% to settle at US$59.32 per barrel yesterday and US West Texas Intermediate crude fell 1.9% to $53.14 per barrel at the end of the trading day.

RBC Capital Markets said in a report that the lockdown of Chinese cities and cancelled flights threatens one of the steadiest growth areas of global oil demand, with jet fuel accounting for about 15% of demand growth in China.

However, the financial services advisory said fears over weakening jet fuel consumption is currently confined to China despite cases of coronavirus spreading to the US, Europe and Australia.

“This thing is still in the process of rearing its ugly head and that’s why oil is taking this so hard because this could really turn into an acute drop in demand at least for a time,” said John Kilduff, partner at Again Capital LLC in New York.

On Sunday, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said that OPEC+ would step in to boost oil prices if needed, but affirmed his confidence in the ability of Chinese authorities to contain the new virus.