Crude Prices Fall on Coronavirus Fears -- Update
January 22 2020 - 4:16PM
Dow Jones News
By Sarah Toy
Crude prices fell to seven-week lows on Wednesday, weighed down
by concerns that a deadly strain of coronavirus that originated in
China could dent demand for oil and jet fuel.
U.S. crude futures fell 2.8% to $56.74 a barrel, while Brent,
the global gauge of prices, slid 2.1% to $63.21 a barrel.
The pneumonia-causing virus has spread across China and, as of
Tuesday, into the U.S., sparking a flurry of travel cancellations
and hitting shares of airline operators.
Some analysts are looking to prior outbreaks, such as 2002-03's
severe acute respiratory syndrome (SARS), as a reference point for
predicting how the current outbreak could affect oil demand. In
2003, the SARS outbreak weighed on annual air traffic and jet-fuel
prices, wrote analysts at Goldman Sachs in a note. Assuming a
similar response to the current virus, they predict global demand
for oil could drop by around 260,000 barrels a day, pushing prices
down by $2.90 a barrel.
But oil watchers also urged caution in making direct
comparisons.
"In the worst-case scenario, the economic effects could be
comparable to the SARS outbreak in 2003," wrote analysts at Raymond
James in a note. "For now, the situation is not nearly on such a
scale."
The latest decline in prices also comes after the International
Monetary Fund trimmed its global-growth forecasts and predicted
slowing economic growth in both the U.S. and China, sparking
worries about future demand. Investors are also confident that the
market is well supplied: Despite recent threats to supply in Iraq
and Libya, U.S. crude prices have fallen 7.1% so far in January,
highlighting investors' belief that global supply will remain
strong.
Elsewhere in commodities, natural-gas prices edged up 0.5% to
$1.905 per million British thermal units after hitting multiyear
lows on Tuesday. However, sentiment remains weak, as weather models
continue to predict warmer-than-usual weather into at least the
first week of February.
Natural-gas prices typically rise during this time of year as
temperatures dip and homeowners turn on their heaters. However, a
glut of supply and warm weather have driven prices down in recent
months.
Write to Sarah Toy at sarah.toy@wsj.com
(END) Dow Jones Newswires
January 22, 2020 16:01 ET (21:01 GMT)
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