After a brief reprieve earlier this week, oil prices tumbled again on Thursday, approaching a bear market, as fears spread that the coronavirus outbreak in China would depress oil demand, at least in the short term.
At 10:52 a.m. EDT on Thursday, WTI Crude was down 2.38 percent at $52.06 and Brent Crude was trading down 2.39 percent at $57.52, both flirting with bear market territory.
Since the outbreak of the coronavirus in China, oil prices have lost more than 10 percent, and are now at their lowest levels since early October 2019.
Even with Libya's oil production plummeting by nearly 1 million barrels per day (bpd) due to the port blockade by forces loyal to General Khalifa Haftar, oil prices have seen downward pressure over the past week and a half as fears of oil demand destruction currently outweigh supply outages.
Yesterday's EIA inventory report was also not supportive for oil prices, after the Energy Information Administration reported a build in oil inventories of 3.5 million barrels for the week to January 24. Analysts had expected a draw of 460,000 bpd, after last week the EIA reported a draw of 400,000 bpd for the seven days to January 17.
According to oil market analysts, until the impact of the Wuhan virus on the Chinese economy and oil demand becomes clearer, market participants will continue to be spooked by the specter of waning oil demand at a time when demand is weakest in the year. Related: Why The Coronavirus Is A Real Threat To Oil Markets
"The Wuhan virus outbreak and its economic fall-out on Asia, the engine room of the world, remains the most crucial issue facing oil markets, with any rally likely to have short half-lives," Jeffrey Halley, senior market analyst at OANDA, told Reuters.
"There is the risk that sentiment gets hit further in the near term," ING strategists said on Thursday, noting that "A number of international flights to China have been cancelled and if this trend continues in the coming days and weeks it will likely only deepen demand concerns."
Yet, if losses in Libya's oil supply to the market persist for longer, they would be enough to tip the oil market into deficit this quarter, ING strategists Warren Patterson and Wenyu Yao said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More