(Bloomberg) Oil headed for a 5.7% loss this week amid fears that China’s coronavirus will erode fuel demand just as markets struggle with a fragile world economy and adequate supplies.Futures held above $55 a barrel in New York, buoyed by an unexpected drop in U.S. crude inventories and a political crisis in Libya that has halted oil exports. Yet the signs of tighter supply paled against the International Energy Agency’s assessment that “the world is awash with oil,” a surplus that could grow if the virus outbreak hits consumption of jet fuel in China, the biggest oil importer.
“China’s economic prospects and oil demand are at risk, hence why caution reigns supreme in financial markets,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Goldmans Sachs Group Inc. said earlier this week that, if the coronavirus has an impact similar to the 2003 SARS epidemic, demand could be curbed by 260,000 barrels a day.
The fast-spreading virus is the latest challenge for a market that’s been buffeted this year by geopolitical turmoil in the Middle East and North Africa, as well as the phase-one trade deal between Beijing and Washington.
West Texas Intermediate futures for March delivery slipped 39 cents to $55.20 a barrel on the New York Mercantile Exchange as of 8:38 a.m. local time. Prices are poised for a third weekly drop after closing at the lowest level since Nov. 29 on Thursday. Brent crude fell 46 cents to $61.58, and was also set for a third weekly decline.
Other oil-market news
U.S. crude inventories fell by 405,000 barrels last week, but gasoline stockpiles increased by 1.75 million barrels to 260 million barrels, an all-time high since reporting began in 1990, according to the Energy Information Administration.
Brazil, which became a net oil exporter last year, wants to expand its footprint in global energy markets without joining OPEC.
A line of oil tankers waiting to load is forming at Libya’s idle ports. Crude exports that would typically exceed 1 million barrels a day have ground to a halt as military commander Khalifa Haftar shut the country’s ports and key oil fields.
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