Oil prices extended losses early on Monday, slumping to nearly four-month lows amid fears that the Chinese coronavirus outbreak will slow China’s economic growth and oil demand.
At 08:25 a.m. EDT on Monday, WTI Crude was down 3.19 percent at $52.46 and Brent Crudetraded down 3.11 percent at $58.03, as investors and speculators were dumping riskier assets such as oil and rushed to safe-haven assets such as gold, Treasury bills, and the Japanese yen.
Oil extended its losses from last week, while the death toll from the coronavirus continues to rise. Brent Crude prices are nearing their lowest since early October 2019 and are now below the $60 a barrel psychological threshold for the first time in 2020.
Brent Crude prices have dropped by some 9 percent since the virus was first detected last week, ING strategists said on Monday, noting that “Macro concerns over energy demand due to curtailed movement of people and trade have been weighing on an oil market that is otherwise tight due to ongoing supply concerns in Libya and OPEC+ output cuts.”
Amid the panic mode in the market, OPEC’s largest producer and de facto leader Saudi Arabia issued a statement on Monday, trying to calm the oil market.
“The Kingdom of Saudi Arabia and other OPEC+ producers have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires,” Energy Minister Prince Abdulaziz bin Salman said in a statement carried by the official Saudi Press Agency.
The current market meltdown, including oil and other commodities, “is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” the minister added.
In a separate statement, the energy minister of the United Arab Emirates (UAE), Suhail al-Mazrouei, said that the market should not overreact to the gloomy demand outlook due to the virus outbreak in China.
“It is important that we do not exaggerate projections related to future decreases in oil demand due to events in China, and the market does not over-react based on psychological factors, driven by some traders in the market,” al-Mazrouei said, as carried by Reuters.