Oil had it worst week since the 2008 financial crisis as panic over the COVID-19 epidemic battered global markets.
Futures in New York fell 16 percent this week, marking the biggest weekly drop since December 2008.
The viral epidemic showed no signs of relenting, with the WHO raising global risk from “high” to “very high.”
The collapse of financial markets prompted US Federal Reserve Chairman Jerome Powell to assure investors that the central bank is prepared to cut interest rates to mitigate the virus’ threat to economic activity.
“A month ago, the concern was only China,” Raymond James & Associates Inc energy research analyst Pavel Molchanov said.
“This meltdown is a fear of a global pandemic. The risk is we will see the same disruptions we saw in Asia, from travel restrictions to quarantines, materialize all over the world,” Molchanov added.
Oil prices have tumbled almost 27 percent this year on concerns the coronavirus outbreak will dent crude demand.
OPEC and its allies have signaled that the coalition could reach an agreement to stem the rout before meeting in Vienna next week.
Saudi Arabia is reportedly pushing for collective OPEC+ production cuts of an additional 1 million barrels per day, of which it would bear the brunt.
However, Riyadh’s proposal might not be enough to balance the oil market, a coronavirus scenario analysis by Bloomberg Intelligence analysts Salih Yilmaz and Rob Barnett found.
The alliance’s overall compliance with production cuts has not been enough to support oil prices. The re-emergence of Libyan barrels also remains a risk.
“We may be too far ... for any OPEC cuts to have a meaningful impact,” R.J. O’Brien & Associates LLC market strategist Peter McGinn said.
“If the virus keeps spreading, that is just going to keep hurting demand and cause another wave of panic selling. A production cut could give it a bounce, but these lows will persist for the foreseeable future without a vaccine,” he added.
West Texas Intermediate futures for delivery next month on Friday fell US$2.33, or 5 percent, to settle at US$44.76 per barrel on the New York Mercantile Exchange.
Brent for settlement next month, which expired on Friday, lost US$1.66, or 3.2 percent, to end the session at US$50.52 per barrel on the ICE Futures Europe exchange. The more active May contract fell 4 percent to US$49.67.
Brent’s so-called “red spread” — the difference between December contracts in consecutive years — sank deeper into bearish contango, settling at the lowest level since 2018.
In other energy trading, wholesale gasoline fell US$0.02 to US$1.39 per gallon and heating oil was unchanged at US$1.49 per gallon, while natural gas fell US$0.07 to US$1.68 per 1,000 cubic feet.
Gold fell US$75.90 to US$1,564.10 per ounce and silver fell US$1.27 to US$16.39 per ounce, while copper fell US$0.02 to US$2.55 per pound.
Additional reporting by AP
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