FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S. February 11, 2019. (Photo Crtedit: Nick Oxford/Reuters)

Crude prices extended declines on Monday, dropping below $60 for the first time in nearly three months as the death toll from China’s coronavirus rose and more businesses were forced to shut down, stoking expectations of slowing oil demand.

Brent crude LCOc1 fell by $1.79 a barrel, or 2.95%, to $58.90 by 0903 GMT, its lowest since late October. Oil prices last fell below $60 on Nov. 1.

U.S. crude CLc1 was down by $1.63, or 3%, at $52.55.

Global stock exchanges also fell as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and Treasury notes.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud said on Monday that OPEC and allied global producers led by Russia can help to balance the oil markets in response to any demand changes.

He also said the Kingdom, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), was watching developments in China and that he felt confident the new virus would be contained.

Markets are being “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite (the virus’) very limited impact on global oil demand,” the minister said.

Prince Abdulaziz added that the outbreak of the SARS virus in 2002-2003 did not lead to a significant reduction in oil demand.

OPEC and its allies, known as OPEC+, have been withholding supply to support oil prices for nearly three years and on Jan. 1 increased their agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd through March.

Prince Abdulaziz said on Friday the aim of OPEC+ was to cut seasonal inventory builds that typically occur in the first half of the year. All options would be open when OPEC+ meets in Vienna in March, he said.

Brent crude oil prices dropped by nearly 14% since a spike in tensions between the United States and Iran took prices to a closing high above $68 a barrel on Jan. 6.

The losses since are in spite of a fall in production from Libya by 75% to less than 300,000 barrels per day because of an ongoing blockade on oilfields.

Source: Reuters, January 27, 2020