By Sarah Toy
Oil prices suffered their worst week in over a year, dragged lower by fears that a deadly new coronavirus spreading throughout China and other countries will weigh on economic growth and hurt demand for crude.
Brent, the global gauge of prices, fell 6.4% this past week to notch its biggest weekly percentage decline since December 2018. U.S. crude futures fell 7.5%, marking their largest weekly loss since July.
Crude prices were hit this week after reports of the emergence of a deadly new respiratory virus in the central Chinese city of Wuhan that has killed at least 26 people and sickened hundreds. The second U.S. case was confirmed by health officials on Friday.
"The virus has significant potential to take a lot of demand off the market," said Robert Yawger, director of the futures division at Mizuho Securities USA.
On Friday, Brent declined 2.2% to $60.69 a barrel and West Texas Intermediate futures fell 2.5% to $54.19 a barrel, with some analysts saying the virus had already begun denting oil demand.
Phil Flynn, senior market analyst at the Price Futures Group, pointed to Beijing's lockdown of Wuhan and nearby cities during a time when many families would normally be traveling for Lunar New Year festivities.
"Many of the Lunar Day festivities have been canceled along with flights due to airport closures and trains shutting down," he wrote in a note. "That will eventually add up to hundreds of thousands of unused barrels of jet fuel, diesel and gasoline."
The virus is the latest blow to U.S. crude-oil prices, which have fallen more than 11% so far this year. Investors are worried that there is too much oil in the world, despite recent production cuts by the Organization of the Petroleum Exporting Countries that could tamp down supply and a limited trade agreement between the U.S. and China that could spur demand.
Low prices have persisted even through shocks that many expected would break them from their rut. Crude shot up 15% in mid-September, after an attack on Saudi Arabian production facilities, but returned to pre-attack levels in less than two weeks. In early January, prices spiked after the president ordered an airstrike that killed a powerful Iranian general, but fell past their pre-attack levels soon afterward.
More recently, futures rallied earlier this past week after a rebel group in Libya blocked a significant portion of the country's crude exports, but prices have since fallen, highlighting investors' concerns of a supply glut.
In another sign of caution, bets by hedge funds and other speculative investors on rising U.S. crude prices have fallen from a recent peak hit earlier this month.
News of the virus largely overshadowed Thursday's inventory report from the Energy Information Administration. U.S. crude stockpiles fell by 400,000 barrels the week ended Jan. 17, according to the EIA, more than the 300,000-barrel drop that analysts and traders surveyed by The Wall Street Journal had expected.
"The bullish EIA report was steamrolled by demand concerns surrounding coronavirus," said Mr. Yawger.
Elsewhere in commodities, front-month copper futures had their worst week since November 2014, falling 5.8% on worries that the coronavirus would hit industrial activity in China and reduce demand for base metals. The price of copper fell 1.5% to $2.6855 a pound on Friday.
The price of natural gas fell to its lowest level since March 2016, driven down by a supply glut and persistent warmer-than-usual winter weather across the U.S. that has tamped down demand. Natural-gas futures slipped 1.7% to $1.893 per million British thermal units on Friday.
Natural-gas stockpiles fell by 92 billion cubic feet last week, according to the EIA. Analysts and traders surveyed by the Journal had been expecting an 88-billion cubic foot withdrawal, though total inventories are still around 9% higher than the five-year average.
Write to Sarah Toy at firstname.lastname@example.org
(END) Dow Jones Newswires
January 24, 2020 18:46 ET (23:46 GMT)
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