Oil under pressure on spread of Wuhan virus, US oil-stocks build

Oil prices fell on Thursday as alarm spread over the economic impact of the Wuhan virus in China, while a bigger-than-expected increase in U.S. crude stocks added to the negative tone.

Brent was down 88 cents, or 1.5%, at $58.93 per barrel, having risen 0.5% on Wednesday. U.S. West Texas Intermediate crude was down 72 cents, or 1.3%, at $52.61 a barrel, after dropping 0.3% in the previous session.

Prices had steadied in recent days, after a rout pushed them to three-month lows as investors tried to assess damage from the virus to economic growth and demand for crude and its products.

But now the rising death toll from the virus and its dispersion around the world has again turned screens red, with Asian stock markets down sharply.

“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,” said Jeffrey Halley, senior market analyst at OANDA.

Three Japan citizens evacuated from Wuhan, China, and repatriated on Wednesday have been confirmed to be infected with the coronavirus, including two without symptoms, the health ministry said on Thursday. Two people refused to be tested and Japan has 11 confirmed cases.

Infections in China have passed 7,700 and several countries started isolating citizens evacuated from Wuhan to help efforts to prevent the global spread of the epidemic. In China, the death toll has climbed to 170 people.

The World Health Organisation’s Emergency Committee is set for another meeting later on Thursday to reconsider whether the rapid spread of the virus should now be called a global emergency.

Airlines around the world are suspending or reducing direct flights to China as travel warnings are issued by governments and passenger numbers drop.

Still, ING cautioned that outages in Libya – where production has been steadily declining amid a blockade – should not be discounted.

“While demand is a real concern, it’s important not to forget about the supply disruptions from Libya – if these losses persist, it would be enough to swing the market into deficit this quarter,” ING said in a note.

The bigger-than-expected build in U.S. crude oil inventories last week also kept pressure on prices.

Crude stocks rose by more than seven times market expectations, gaining 3.5 million barrels in the week to Jan. 24, the U.S. Energy Information Administration (EIA) said on Wednesday.

Gasoline stocks rose to a record high, increasing for a 12th consecutive week to 261.1 million barrels, the EIA said.

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