Oil prices fell nearly 1% on Friday on renewed concerns about crude demand being pinched by the economic impact of the coronavirus outbreak, while leading producers appeared to be in no rush to curb output.
The latest signs of infections outside the Hubei province epicentre in China spurred a selloff across financial markets, as G20 policymakers travelled to Saudi Arabia for talks on the global economy.
Brent crude was down 1.4%, at $58.46 a barrel, while U.S. crude dropped 0.9%, at $53.38 a barrel.
Both benchmarks were on track for their second consecutive weekly rise, with Brent up 1.8% and U.S. crude rising 2.3%, as fears over the virus’ impact on demand eased earlier in the week and after a smaller-than-expected U.S. crude stock build.
“It’s safe to say that uncertainty (surrounding coronavirus) has returned with a vengeance,” said Ole Hansen, head of commodity strategy, Saxo Bank.
“We have to acknowledge that we’re dealing with the biggest demand shock since the financial crisis… Until we see China getting back to work, the virus will be the main focus.”
In the latest evidence of the economic hit, U.S. business activity in both the manufacturing and services sectors stalled in February.
Concerns over the virus have also largely overshadowed risks to supply, including the latest blockade in Libya, said Edward Moya, senior market analyst at OANDA in New York.
The United Nations on Friday said ceasefire talks were back on track between forces fighting over Libya’s capital, days after the internationally recognised government pulled out of negotiations.
An agreement could end outages of about 1 million barrels per day of Libyan oil and increase pressure on prices.
Also on the supply front, Yemen’s Houthis said they had struck facilities of Saudi oil giant Aramco in the Red Sea port of Yanbu.
Meanwhile in the United States, the oil rig count, an indicator of future production, rose for a third straight week. Drillers added one oil rig this week, bringing the total count to 679, the highest since the week of Dec. 20, energy services firm Baker Hughes Co said.
OANDA’s Moya also pointed to signs the Organization of the Petroleum Exporting Countries (OPEC) was unlikely to add to existing supply curbs.
Russian Energy Minister Alexander Novak said on Thursday that producers understood it would no longer make sense to meet before a planned gathering in March.
“Concerns the Saudis and Russians are struggling to agree on the appropriate response to the demand destruction the coronavirus has created,” were also weighing on prices, Moya said.
“Markets are starting to doubt we’ll see the full 600,000 bpd in additional (OPEC+) cuts.”