An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS
An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS

London — Crude prices extended declines on Monday, dropping below $60 for the first time in nearly three months as the death toll from China’s coronavirus rose and more businesses were forced to shut down, stoking the expectation of slowing oil demand.

Brent crude fell by $1.79 a barrel, or 2.95%, to $58.90 by 9.03am GMT, its lowest since late October. Oil prices last fell below $60 on November 1.

US crude was down by $1.63, or 3%, at $52.55.

Global stock exchanges also fell as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and treasury notes.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman Al-Saud, said on Monday that Opec and allied global producers led by Russia can help to balance the oil markets in response to any demand changes.

He also said the kingdom, the de-facto leader of Opec, was watching developments in China and that he felt confident the new virus would be contained.

Markets are being “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite [the virus’s] very limited impact on global oil demand”, the minister said.

Prince Abdulaziz said the outbreak of the severe acute respiratory syndrome (SARS) virus in 2002-2003 did not lead to a significant reduction in oil demand.

Opec and its allies, known as Opec-plus, have been withholding supply to support oil prices for nearly three years and on January 1 increased their agreed output reduction by 500,000 barrels a day (bbl/day) to 1.7-million barrels a day to end-March.

Prince Abdulaziz said on Friday the aim of Opec-plus was to cut seasonal inventory builds that typically occur in the first half of the year. All options would be open when Opec-plus meets in Vienna in March, he said.

Brent crude oil prices dropped by nearly 14% since a spike in tension between the US and Iran took prices to a closing high above $68 a barrel on January 6.

The losses since are in spite of a fall in production from Libya by 75% to less than 300,000bbl/day because of a blockade on oilfields.

“Investor fears on oil demand have risen considerably, driven by unfavorable US inventories and ... concerns on impact from the coronavirus outbreak,” Goldman Sachs said in a note.

Reuters