Oil prices slumped by 4% on Monday as the rapid spread of the coronavirus in countries outside China added to investor concerns over the impact on demand for crude.
Global equities also extended losses as worries about the impact of the virus grew, with the number of cases jumping in Iran, Italy and South Korea.
Brent crude was down $2.34, or 4%, at $56.16 barrel by 1305 GMT. U.S. crude futures fell by $2.05, or 3.8%, to $51.33.
“The weekend’s developments provided us with a stark reminder that the coronavirus is currently an unstoppable force,” said Tamas Varga, an analyst at oil brokerage PVM.
South Korea’s fourth-largest city, Daegu, was increasingly isolated as the number of infections there rose rapidly. The country reported its seventh death after raising its infectious disease alert to its highest level.
Italy reported a fifth death from the flu-like virus and 150 infections.
Meanwhile, Iran said it had confirmed 61 cases and 12 deaths. Afghanistan, Iraq, Kuwait, Saudi Arabia and Turkey imposed travel and immigration curbs on the Islamic Republic.
“We should not underestimate the economic disruption, as a super spreader could trigger a massive drop in business activity around the globe of proportions the world has never dealt with before,” Stephen Innes, chief market strategist at AxiCorp, said in a note.
Oil prices received some support after local health officials in China said on Monday that four provinces had lowered their virus emergency response measures.
Chinese President Xi Jinping on Sunday said that the world’s largest energy consumer will adjust policy to help to cushion the economic impact from the virus outbreak.People wear protective masks at Venice Carnival, which the last two days of, as well as Sunday night’s festivities, have been cancelled because of an outbreak of coronavirus, in Venice, Italy February 23, 2020. REUTERS/Ohad Zwigenberg
Goldman Sachs said commodity prices could fall sharply before any rebound on the back of Chinese stimulus efforts.
“The promise of stimulus has made commodity markets act like equity markets, building up risks of a sharp correction,” the bank said in a note.
In the United States, the oil rig count rose for a third week running. Drillers added one oil rig last week, bringing the total count to 679, the highest since the week of Dec. 20, said energy services company Baker Hughes.
However, Bank of America Global Research kept its 2020 forecast for the price of Brent crude steady at $62 a barrel, citing voluntary and involuntary declines in OPEC supply and the resilience of markets to geopolitical shocks.