Oil Fell Deeper as China Virus Might Affect Fuel Demand

Oil Fell Deeper as China Virus Might Affect Fuel Demand

Oil Fell Deeper as China Virus Might Affect Fuel Demand

In the oil inventory report, prices slumped to their lowest in seven weeks on Thursday. It slid over 1% on worries that the spread of a respiratory virus from China may damage fuel demand. And this will happen if it will stunt economic growth in a mirror of the SARS epidemic almost 20 years ago.

Brent crude futures moved down 82 cents or 1.3% to trade at $62.39 per barrel. Earlier, it went down to its lowest since December 4 after dropping 2.1% in the last session. Then, U.S. West Texas Intermediate (WTI) futures also tumbled 86 cents or 1.5% to $55.88 per barrel. It earlier slipped to its lowest since December 3. And the contract fell 2.7% on Wednesday.

Furthermore in the factors affecting oil, the so-called novel coronavirus has already killed 17 people through respiratory illness since it emerged late last year in Wuhan – home of 11 million people in central China. Almost 600 cases have been confirmed, and the city authorities have shut down the transport network. Additionally, they insist that residents not to leave to avoid the contagion spreading.

The chances for a pandemic have reignited memories of the Sudden Acute Respiratory Syndrome epidemic in 2002-2003. This also began in China, and damaged economic growth, leading to a slump in travel.

ING Research stated, “Downside demand risk due to the Wuhan virus appears to be a growing concern for the market. And understandably so, with any clampdown on travel likely to weigh on fuel (oil) demand.”

 

Airlines

Overseas airlines, together with rail operators in Hong Kong and elsewhere, have begun shutting down connections to Wuhan – basically now in lockdown.

JPM Commodities Research noted, “We estimate a price shock up to $5 if the crisis develops into a SARS-style epidemic based on historical oil price movements.”

But the U.S. bank sticks to its forecasts for Brent to average $67 a barrel in the first quarter and $64.50 a barrel throughout 2020.

Meanwhile, amid every concern about hits to oil demand, supply remains plentiful. Last week, U.S. crude stockpiles gained by 1.6 million barrels, against expectations for a fall.

Also, Brazil produced above a billion barrels of oil in 2019. Then, China revealed on Thursday that its gasoline exports are surging. It boosted to almost a third last year as more new refineries opened.

 

Cottonseed Oil Cake

Elsewhere, on Agri commodities, cottonseed oil cake prices on Wednesday plummeted by Rs 20 to trade at Rs 1,989 per quintal in futures trade. At the same time, participants chopped off their bets amid a weak trend at the spot market.

According to several market players, sell-off by participants at the current levels amid subdues trend in the market mostly weighed on cottonseed oil cake prices.

Then, on the National Commodity and Derivatives Exchange, cottonseed oil cake delivery for January declined by Rs 20 or 1 percent. It is trading at $1,989 per quintal with an open interest of 90,390 lots.

For February, its delivery dropped by Rs 26 or 1.27 percent. And cottonseed oil cake trades at 2,016 per quintal in a business turnover of 20,300 lots.

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