Coronavirus fears have oil prices over a barrel

US crude drops below $50 a barrel as virus spreads and fears mount over potential hit to global economy.

    The American Petroleum Institute (API) said late on Tuesday that crude stockpiles rose 1.3 million barrels last week [File: Jessica Lutz/Reuters]
    The American Petroleum Institute (API) said late on Tuesday that crude stockpiles rose 1.3 million barrels last week [File: Jessica Lutz/Reuters]

    Fears over the economic fallout of the coronavirus outbreak kept weighing on oil prices on Wednesday, with benchmark United States crude dropping below $50 to its lowest since January 2019.

    Asia, Europe and oil-producing countries in the Middle East reported hundreds of new coronavirus cases and the US has warned of an inevitable pandemic.

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    Global benchmark Brent crude was down 55 cents, or 1 percent, to $54.40 a barrel by 14:32 GMT, while US benchmark West Texas Intermediate (WTI) crude was 24 cents, or 0.5 percent, lower at $49.66 a barrel.

    Pandemic fears intensified as authorities around the world battled to prevent the spread of coronavirus, which has now been found in about 30 countries.

    Stock markets in Asia and Europe tumbled for a fifth straight day, while investors kept fleeing to safe-haven assets, driving prices higher.

    Gold rose back towards seven-year highs and US bond yields - which move in the opposite direction to prices - held near record lows after governments and health authorities warned of a possible pandemic.

    The World Health Organization (WHO) chief said while the sudden rise in novel coronavirus cases was "deeply concerning", the virus could still be contained and did not amount to a pandemic.

    US President Donald Trump said he will hold a news conference on the coronavirus at 6pm (23:00 GMT).

    Goldman Sachs cut its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its forecast for Brent crude to $60 a barrel from $63.

    Due to the coronavirus outbreak, the German economy - Europe's largest - is nearing stagnation, the DIW economic institute said on Wednesday.

    Oil prices had risen earlier in the day on short-covering and amid hopes for deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies, including Russia, a grouping known as OPEC+.

    Saudi Arabia's energy minister said on Tuesday he was confident that OPEC+ would respond responsibly to the spread of the virus.

    OPEC+ are due to meet in Vienna over March 5-6.

    "Yet there is no guarantee that buyers will emerge out of the woodwork even if OPEC+ further tightens the oil spigots," said Stephen Brennock of oil broker PVM.

    Analysts said prices were also under pressure from the recent strength in the US dollar, which generally moves in the opposite direction to oil prices.

    The International Energy Agency's (IEA) outlook on global oil demand growth has fallen to its lowest level in 10 years. IEA Executive Director Fatih Birol said on Tuesday it could be reduced further due to the coronavirus outbreak.

    The American Petroleum Institute (API) said late on Tuesday that crude stockpiles rose 1.3 million barrels last week.

    SOURCE: Reuters news agency