Oil resumes fall after US stockpile build-up adds to China virus fears

Singapore

OIL resumed declines as the biggest jump in US crude stockpiles in almost three months added to concern over weak demand in a market already grappling with China's spreading coronavirus.

US inventories rose by 3.5 million barrels last week, raising fears of a supply glut. Airlines across the world suspended flights to China as the death toll from the virus reached 170, with the World Health Organization meeting to consider issuing a global alarm. Crude spiked briefly after an attempted attack on Saudi Aramco's Jazan plant by Yemen's Houthi rebels.

Oil is heading for the biggest monthly drop since May as the virus crimps global travel and economic activity within China, the world's biggest energy consumer.

The impact of the potential demand hit is being heightened as the market is awash with crude, particularly from non-Opec countries.

The producer group is considering pushing forward a meeting initially scheduled for March, according to Algeria's energy minister, amid the price slump.

"What we're seeing this year and are going to continue seeing is that the geopolitical premium doesn't stick," said Vandana Hari, founder of energy consultant Vanda Insights in Singapore. The underlying reason for that "is the view that the oil market is well supplied", she said.

West Texas Intermediate (WTI) crude for March delivery fell 1.5 per cent to US$52.55 a barrel on the New York Mercantile Exchange as at 7.34 am in London after closing down 0.3 per cent on Wednesday. It has dropped around 14 per cent so far in January.

Brent for March settlement declined 1.5 per cent to US$58.89 a barrel on the London-based ICE Futures Europe exchange after rising 0.5 per cent in the previous session. The global benchmark crude traded at a US$6.34 premium to WTI.

The increase in US crude stockpiles was the largest since the week ending Nov 1, according to Energy Information Administration data. Analysts surveyed by Bloomberg had forecast inventories to grow by 1.29 million barrels.

Analysts are cutting their forecasts for Chinese crude consumption due to the virus, with jet fuel demand most affected. Sanford C Bernstein & Co reduced its estimate for oil demand growth in the nation this year to 100,000 barrels a day from 350,000. Morgan Stanley said consumption growth could take a 75,000 barrel-a-day hit if the outbreak continues to escalate for three to four months. BLOOMBERG