U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday shortly after the regular session opening. Brent crude only is trading below the major bottom put in at $52.78 on December 24, 2018. Meanwhile, U.S. crude oil is rapidly moving closer to its next downside target, the December 24, 2018 min bottom at $45.92.
Coronavirus Continues to Cause Demand Worries
Oil prices are down for a fifth day on Thursday as a growing number of new coronavirus cases outside of China fuelled fears of a pandemic which could slow the global economy and lower crude demand.
On Wednesday, for the first time ever, the number of new coronavirus infections outside China, the source of the outbreak, exceeded the number of new Chinese cases.
Late Wednesday, Donald Trump tried to calm investor nerves by telling Americans that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.
He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”
Global Fuel Demand Limited
The coronavirus’ spread to large international economies including South Korea, Japan and Italy has caused concerns that fuel demand growth will be limited. On Wednesday, consultants Facts Global Energy forecast oil demand growth will only be 60,000 barrels per day in 2020, or practically “zero”, because of the widening outbreak.
Coronavirus Spread in US Fuels Fresh Round of Selling
Speculators, betting that coronavirus may spread in the United States, prompted a fresh round of selling on Wednesday that has carried over into Thursday’s session. If the outbreak continues to worsen in the U.S. then look for energy prices to continue to fall with the move led by gasoline. The United States is the world’s largest oil producer and consumer.
Gasoline stockpiles dropped by 2.7 million barrels in the week to February 21 to 256.4 million, the U.S. Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.
U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA report showed. This was less than the 2-million barrel rise analysts had expected.
The outlook for crude oil prices is bearish. If April Brent crude oil prices fall below $50.00 per barrel, expect OPEC and its allies to sit up and take notice. OPEC+ plans to meet in Vienna over March 5-6.