London — Oil slipped below $62 a barrel on Friday and headed for a weekly decline as concern that the coronavirus in China may spread, curbing travel and oil demand, overshadowing supply cuts.
The virus has prompted the suspension of public transport in 10 Chinese cities. Health authorities fear the infection rate could accelerate over the Lunar New Year holiday this weekend, when millions of Chinese travel.
Global benchmark Brent LCOc1 was down 28 cents to $61.76 by 1302 GMT. The contract is down almost 5% this week, its third consecutive weekly drop. U.S. crude CLc1 slipped 20 cents to $55.39 and was also on course for a weekly decline.
“One should be prepared for negative surprises when it comes to Chinese demand,” said Eugen Weinberg, analyst at Commerzbank. “The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”
China is the world’s second-largest oil consumer so any slowdown in travel would show up on demand forecasts.
Offering some support for prices was the U.S. Energy Information Administration’s latest weekly supply report, which on Thursday showed crude inventories fell 405,000 barrels in the week to Jan. 17. [EIA/S]
Nonetheless, the upside for prices was limited. Oil inventories in the wider industrialised world are above the five-year average, according to OPEC figures, which analysts say is limiting the impact of supply losses.
“Such is the bearish pressure that a raft of ongoing crude supply outages are not gaining much traction,” said analysts at JBC Energy in a report. Such outages include the shutdown this week of the bulk of oil supply in OPEC producer Libya.
The prospect of further steps by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, could still offer support. OPEC+ has been mostly limiting supply since 2017 and on Jan. 1 deepened a cut in output.
Saudi Arabia’s energy minister said all options are open at the next OPEC+ meeting in March, including further cuts, Al Arabiya television reported on Thursday.
The current OPEC+ deal expires at the end of March. Russia’s No. 2 oil producer Lukoil (LKOH.MM) expects it to be extended, Interfax news agency cited its chief executive as saying on Thursday.