Oil slides further over coronavirus as Opec+ convenes to stabilise markets

Prices have dropped more than 20% since early January as markets began factoring the rapid spread of the virus

Pedestrians walk past an electronic billboard showing the Hang Seng Index figures in Hong Kong, China on February 3. EPA

Oil prices faced further losses, with Brent trading at its lowest in more than a year, as fears over the economic impact of the coronavirus rattled markets.

Brent crude was up 0.81 per cent trading at $54.89 per barrel at 4.48pm UAE time, while West Texas Intermediate was up 1.7 per cent at $50.96 per barrel.

The benchmarks have fallen steadily, with Brent sliding more than 20 per cent of its value since early January due to a fall in demand for oil in China as trade, supply chains, logistics and travel industries were disrupted by the outbreak of the virus. Many airlines have cancelled flights to China and some businesses have instructed staff to work from home.

Chinese stocks plunged about 8 per cent when the exchange opened on February 2 after the end of the Lunar New Year holiday, the worst drop since a massive sell-off in 2015 that wiped out $3 trillion (Dh11tn) from the markets. In a bid to boost its economy amid rising fears over the spread of the coronavirus, China's government injected 1.2tn renminbi (Dh635 billion) into financial markets on February 3, in addition to lowering interest rates on reverse repurchase agreements by 10 basis points.

Mainland Chinese stocks rebounded on Tuesday. The Shanghai composite was 0.2 per cent higher while the Shenzhen component gained 1.7 per cent. The Shenzhen composite declined 0.4 per cent. Hong Kong's Hang Seng index was 1.1 per cent higher.

The coronavirus, which originated in the Chinese city of Wuhan, has claimed 425 lives and infected more than 20,000 people as of Tuesday.

Oil prices could trade in the $55-65 range after the second quarter of 2020 due to the impact of the virus on the oil markets, said Leila Benali, chief economist at Dammam-based Apicorp.

"Coronavirus will impact demand growth in 2020 but we still do not know by how much, with early estimates indicating a downward revision of 300,000 barrels per day to 2020 global liquids demand," she said in a note on Tuesday.
The Opec+ alliance, led by Saudi Arabia and Russia, will convene in Vienna today to discuss additional measures to stabilise markets, which have seen prices plunge to the worst levels since December 2018.

The group began implementing deeper cuts of 1.7 million bpd since the beginning of January to combat a glut in the market, which remained depressed in 2019 from the US-China trade war and slowing demand.