More Coronavirus Woes For Crude, But Prices Could Improve By Summer Says Analyst

With news that the number of new coronavirus infections reported outside China exceeded new Chinese cases, it was entirely expected that oil prices would take another tumble on Thursday - this time for the fifth consecutive session and to their lowest level in over a year.

Brent dropped $1.25, or 2.3 percent, to settle at $52.18 per barrel; it previously hit a session low of $50.97, the lowest since December 2018.

West Texas Intermediate dropped $1.64, or 3.4 percent, to $47.09 per barrel.

Of course, crude traders were at least partly taking their cue from Wall Street, which saw the S&P 500 suffering its biggest one-day point loss since August 2011 and the Dow Jones Industrial Average marking its biggest-ever one-day point drop.

Edward Moya, senior market analyst at OANDA, noted that “Oil is in free-fall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters."

Indeed, Facts Global Energy predicted oil demand would grow by 60,000 barrels per day (bpd) this year, a level it called “practically zero.”

As if to support the contention that 2020 will be dismal for the market, two sources with knowledge of the matter told media that Saudi Arabia is reducing crude supplies to China in March by at least 500,000 bpd due to slower refinery demand; China normally takes up to 2 million bpd of Saudi crude.

As for the hope that the Organization of the Petroleum Exporting Countries (OPEC) could substantially help keep the crude market balanced by enacting deeper cuts, S&P Global Platts said even if the cut was on the magnitude of 600,000 bpd, prices could remain depressed until April.

However, Kang Wu, Asia's head of analytics for S&P, added that although the current buildup in inventories will take that long to deplete, prices will improve by the summer.