iStockphoto, Leonid Ikan
By Jessica Resnick-Ault
NEW YORK (Reuters) – Oil fell below $56 a barrel on Tuesday, dropping for a third day, as concerns about the spread of the coronavirus and its impact on oil demand outweighed OPEC output cuts and Libyan supply losses.
Crude fell almost 4% on Monday, with other commodities also reporting losses while U.S. and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic.
Brent crude fell 83 cents to $55.47 a barrel by 12:33 p.m. EST. U.S. West Texas Intermediate crude slipped 91 cents to $50.52.
“Demand concerns are wiping out all of the gains we have made over the last few weeks,” said Bob Yawger, director of energy futures at Mizuho in New York. “This is not a situation that is going to suddenly get better.”
South Korea aims to test more than 200,000 members of a church at the center of a surge in coronavirus cases. The virus is also spreading in Europe and the Middle East.
Concern about the demand impact from the virus has pushed Brent down by almost $10 a barrel this year despite the shutdown of most of Libya’s output and a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and allies.
Prices received further support as lawmakers based in areas of eastern Libya on Monday said that they would not participate for now in peace talks.
However, oil could come under more pressure from the latest U.S. supply reports.
Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 2130 GMT.
Potential support for prices could also come from OPEC and allies including Russia, which are considering whether to curb output further. However, scepticism is growing about the chance of further action.
“Doubts are emerging about the willingness of OPEC+ to extend and expand the necessary production cuts,” said Commerzbank analyst Eugen Weinberg. The producers are due to meet in Vienna over March 5-6 to decide policy.
Saudi Arabia’s energy minister on Tuesday said OPEC+ should not be complacent about the coronavirus. But Russia, key to any deal, has yet to announce its position on further curbs.
Additional reporting by Yuka Obayashi and Alex Lawler; Editing by Marguerita Choy and David Evans.