Oil falls over 2% on concerns over economic toll from virus

BENGALURU (Feb 21) - Oil prices slid more than 2% on Friday as investors fretted about crude demand being pinched by the economic impact of the coronavirus outbreak, while leading producers appeared to be in no rush to curb output.

The latest signs of infections outside the Hubei province epicentre spurred a selloff across financial markets, as G20 policymakers travelled to Saudi Arabia for talks on the global economy.

Brent crude LCOc1 was down $1.32, or 2.2%, at $57.99 a barrel by 10:52 a.m. EDT (1552 GMT), on track for its biggest daily decline in nearly three weeks. U.S. crude CLc1 dropped 96 cents, or 1.8%, to $52.92.

“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 evidence of the economic hit from the virus, U.S. business activity in both the manufacturing and services sectors stalled in February.

Concerns over the virus have also 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 on Friday said ceasefire talks were back on track between forces fighting over Libya’s capital, days after the internationally recognised government pulled out of negotiations.

An agreement between the fighting parties could end outages of about 1 million barrels per day of Libyan oil and increase pressure on prices.

Reuters