By Peter Nurse
Investing.com - Oil prices headed lower Friday, as the spread of the pneumonia-like virus in China looks set to have a significant impact on growth in the world’s largest importer of crude.
By 9:40 AM ET (1440 GMT), U.S. crude futures were down 1.9% at $54.52 a barrel. Brent futures were down 1.7% at $60.97 a barrel.
The SARS-like virus has claimed the lives of 26 people, and has prompted the Chinese authorities to introduce travel restrictions across 10 cities, affecting up to 40 million people according to some reports, in the middle of their holiday season.
“The virus could shave between 0.5 to 1 percentage point off China’s gross domestic product growth this year against a baseline forecast of 5.9 per cent,” the Economist Intelligence Unit said in a report released late Thursday.
Indeed, the outbreak has already killed demand for 200,000 barrels of refined products, estimated Claudia Galimberti of S&P Global (NYSE:SPGI) Platts. He said the shutdown of transportation in Hubei province, where the disease was first noted, has probably eliminated about 50,000 to 70,000 barrels a day of demand.
This expected hit to demand has prompted talk of moves by the Organisation of the Petroleum Exporting Countries (OPEC) to further tighten supply.
Saudi Arabia's energy minister was reported as saying that said all options, including further output cuts, will be on the table at the next meeting of OPEC and its petro allies.
Still, that meeting is scheduled for early March and traders are currently more interested in the current oversupplied nature of the market.
The weekly report published by the Energy Information Administration a day later than usual onThursday revealed that commercial crude oil inventories in the US fell by 0.4 million barrels in the latest week. This compared with hefty draws in the previous two weeks, but still was below estimates for a drop of 1 million barrels,
After the close, Baker Hughes will update the market with its latest numbers on active drilling rigs.