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Brent crude oil, the international benchmark, fell 1.8 percent to $60.90 a barrel while West Texas Intermediate crude oil, the U.S. benchmark, dipped 2 percent to $54.47. They have fallen by 5.9 percent and 6.9 percent this week, respectively.
“Oil prices are at ground zero for the market-related fallout from the SARS-like coronavirus,” Phil Flynn, senior market analyst at the Price Futures Group, said in a note sent to clients on Friday.
The outbreak has already caused “significant oil demand destruction,” according to Flynn, as more than 40 million people have been quarantined ahead of the Lunar New Year, a time when many Chinese would otherwise be traveling.
The cancellation of many Lunar New Year festivities will “eventually add up to hundreds of thousands of unused barrels of jet fuel, diesel and gasoline,” Flynn said.
The outbreak, which originated in Wuhan, China, has sickened 830 people and killed 26 in the country, China’s National Health Commission said Friday. Cases of the virus have also been discovered in the U.S., Japan, Korea, Singapore, Thailand and Nepal.
On Thursday, the World Health Organization said that it's still “a bit too early to consider that this is a public health emergency of international crisis.”
Even before the coronavirus outbreak, oil prices were under pressure due to a supply glut, which isn’t expected to end anytime soon despite OPEC cutting production at its December meeting.
“We expect, even with the cuts coming from OPEC+, we think at least the first half of this year, we will see a surplus of 1 million barrels per day,” International Energy Agency Executive Director Fatih Birol told Reuters at the World Economic Forum in Davos, Switzerland.
Brent crude oil has fallen 7.5 percent this year while West Texas Intermediate crude oil has tumbled 10.7 percent.