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.