By Peter Nurse
Investing.com - Oil prices continued to fall Friday, with the underlying sentiment remaining weak as China’s industrial base braced for extreme measures to contain the spread of the deadly coronavirus.
By 9:20 AM ET (1420 GMT), U.S. crude futures were 0.6% lower at $51.81 a barrel. U.K. Brent, the global crude benchmark, was down 1% at $56.76 a barrel.
Prices have dropped around 15% in January, the biggest fall since May.
The official total of deaths from this virus has topped 200, with almost 10,000 people affected across the whole breadth of the country.
This has prompted Chinese authorities to shut down transport systems, lock down many cities and close many of its industries - all of which should result in a hefty hit to the country’s demand for oil. China is the largest importer of oil in the world.
This doesn’t look like ending anytime soon, with Beijing asking Friday its factories to remain mothballed until Feb. 10.
Goldman Sachs (NYSE:GS) estimated that all these measures taken by the Chinese authorities will result in GDP growth in the country falling to 5.5% this year, 0.4% below its previous 5.9% estimate.
“Fears of weaker demand have weighed on refinery margins, and continued weakness could see some refineries cut run-rates in China,” said analyst at ING, in a research note. “If we were to see this, it would likely be the independent refiners who are first to cut, given their focus on the domestic market.”
The weakness in the oil price has prompted talk that the Organization of the Petroleum Exporting Countries will move up its March meeting, in order to discuss measures to prop up the market.
Saudi Arabia, the biggest member of OPEC, is said to be keen on a get-together to discuss even deeper cuts to production than those already made, but Russia, the most important player in a broader coalition known as OPEC+, is said to be less keen.
“Further downward pressure on prices may speed up the decision on whether to have the meeting in February or not,” added ING.
U.S. oil giants Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) both reported weak sets of results Friday, dragged down by low prices and downstream margins. This follows Royal Dutch Shell's (NYSE:RDSb) poor numbers earlier in the week.