Oil Prices Drop more than 2% …Brent Crude Reaches $ 63.21 a Barrel and
West Texas Intermediate Crude at $ 56.74
23 January
2020
Oil prices
dropped more than 2% on Wednesday as the predictions of the
International Energy Agency on market oversupply and demand, amid
coronavirus outbreak in China, overshadowed concerns over crude
production disruptions in Libya.
Brent crude
futures ended the session down $ 1.38, or 2.1%, to $ 63.21 a barrel,
while West Texas Intermediate crude futures fell $ 1.64, or 2.8%, to set
the settlement price at $ 56.74.
Fatih Birol,
Director of the International Energy Agency, said he expected a
surfeit
of one million barrels per day in the market in the first
half of this year.
“Oil prices
remain glutted due to uncertainties and concerns about the oversupply
and when Saudi Energy Minister Prince, Abdulaziz, rejected to provide
any signs of optimism that OPEC + production cuts will be extended
beyond March,” said Edward Moya, chief market analyst at Oanda in New
York.
“The coronavirus
in China is likely to lead to travel restrictions that could eventually
damage demand for crude during the peak of the season tours in China.”
Markets are
focusing on the emergence of novel coronavirus in China ahead of the
Lunar New Year holidays early next week and the possible impact of the
epidemic on the global economic growth, as hundreds of millions of
Chinese prepare to travel domestically and internally for Lunar Year
holiday.
Death toll due
to the new virus outbreak increased to 17, with more than 540 cases
confirmed, some of which are in far off areas such as the United States.
Goldman Sachs
Group Inc. said that if there is a dramatic development in the virus
outbreak that would probably affect travel and growth, then the demand
for oil may drop by 26000 barrels per day.
Goldman, "Fears
of demand arising from a possible epidemic will bump with the fears of
supply disruptions in Libya, Iran and Iraq, in a way that will lead to
volatilities in the spot price in the upcoming weeks," but "the impact
on the fundamental factors of oil so far remains restricted."
Oil prices have
not been significantly reinforced when the Libyan National Oil
Corporation announced, on Monday, the state of force majeure in crude
loading from two main fields following the recent developments in the
protracted military conflict which have been taking place in Libya.
Unless the oil
facilities return to work speedily, the production of Libya (OPEC
member) may cut to about 72000 barrels per day from about 1.2 million
barrels per day.