Oil prices continue to drop on coronavirus fears
Worries about an impact on demand in China have sent prices crashing
The coronavirus outbreak has continued to impact oil prices, sending Brent crude down to $58 per barrel, from $65 per barrel on 20 Jan.
Demand fears are primarily causing the drop in oil prices, as China (where the outbreak began and is mostly concentrated) is the world's second largest consumer of crude.
"One should be prepared for negative surprises when it comes to Chinese demand," said Eugen Weinberg, analyst at Commerzbank. "The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese."
Because the outbreak is occuring during the Lunar New Year, when many Chinese people travel home to celebrate, a drop in travel would likely impact jet fuel demand and would hit demand forecasts.
While the US Energ Information Administration's weekly supply report noted that crude inventories dropped by 405,000 barrels in the week ending 17 Jan, this has had a limited impact on oil prices. Another factor which should be supporting oil prices is the almost complete shutdown of supply in Libya. However, OPEC estimates that oil inventories in the industrialised world sit above the five-year average.
"Such is the bearish pressure that a raft of ongoing crude supply outages are not gaining much traction," JBC Energy analysts wrote in a note, according to CNBC.