Meanwhile, OPEC insists it can still balance the market: File Image/PixaBay
With first cases confirmed in countries including Greece, Georgia, and Brazil, and fear growing that the coronavirus could spread across North America (due to reports that 83 people were being monitored in New York for possible exposure) crude prices on Wednesday plummeted again, this time to the lowest levels in over a year.
To what extent the fear is justified is unclear, but Jim Ritterbusch, president of Ritterbusch and Associates, noted that "Every time a headline comes out, especially one regarding new cases in the U.S. such as New York, that comes in and forces additional selling and pushes normal fundamental input to the sidelines."
Bob Yawger, director of energy futures at Mizuho, added, "It's going to be hard for risk assets to gather momentum."
Bob Yawger, director of futures, Mizuho
It's going to be hard for risk assets to gather momentum
Accordingly, and despite good news from the Energy Information Administration that crude stocks grew by 452,000 barrels to 443.3 million barrels (far less than the 2 million barrel rise predicted by analysts), Brent on Wednesday settled down $1.52 at $53.43 per barrel, while West Texas Intermediate settled at $48.73 per barrel, down $1.17.
Traders also seemingly took little notice of the World Health Organization stating that while the sudden rise in novel coronavirus cases was "deeply concerning," the virus could still be contained and did not amount to a pandemic.
Up until recently viewed as a potential catalyst in balancing the crude market against the virus but now somewhat sidelined by media, members of the Organization of the Petroleum Exporting Countries (OPEC) insisted they still have rebalancing options.
Prince Abdulaziz bin Salman, energy minister for Saudi Arabia, stated that "We do communicate with each other, we use every opportunity to talk with each other.
"We did not run out of ideas, we haven't lost our phones and there are always good ways of communicating through conference calls and technology is very helpful."
OPEC and its allies led by Russia will meet in Vienna on March 5-6 but there is uncertainty over whether the group will agree to further cut their collective oil output.
Meanwhile, a much-needed optimistic tone to the proceedings was struck on Wednesday by Ibrahim Al-Buainain, chief executive of Aramco Trading.
He conceded that the coronavirus has inflicted a "big hit" on demand in China but said that oil markets will begin to recover in the second quarter as the spread of the virus abates: "By the end of April, we will not have that fear; I am confident that the support and measures taken by countries will contain the virus."