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Oil slides for 4th day as pandemic fears deepen
CRUDE prices slid for a fourth day on Wednesday as Asia and oil-producing countries in the Middle East reported hundreds of new coronavirus cases and the United States warned of an inevitable pandemic. This warning, however, sent gold prices rising on Wednesday after a sharp drop in the previous session.
Brent crude fell US$1.11, or 2 per cent, to US$53.84 a barrel by 0922 GMT, while US West Texas Intermediate crude dropped 85 cents, or 1.7 per cent, to US$49.05 a barrel.
Spot gold rose 0.7 per cent to US$1,646.19 per ounce by 0826 GMT, having slumped as much as 1.9 per cent in the previous session. On Monday, prices touched their highest in more than seven years at US$1,688.66. US gold futures eased 0.1 per cent to US$1,648.30.
Pandemic fears intensified as authorities around the world battled to prevent the spread of coronavirus, which has now been found in about 30 countries.
World stocks tumbled for the fifth straight day on Wednesday, while safe-haven gold rose back towards seven-year highs and US bond yields held near record lows after governments and health authorities warned of a possible coronavirus pandemic.
"People are worried that the virus is spreading across the globe and will become a pandemic," said IG Markets analyst Kyle Rodda. "Perhaps, the worst-case scenario for the global economy could start to materialise and that is keeping gold prices bid because everyone is concerned that the virus is leading to low yields."
Goldman Sachs reduced its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its Brent forecast to US$60 a barrel from US$63.
"We see oil prices improving through the year assuming demand begins to normalise in 2020," it said, referring to the second half of 2020.
Earlier, oil prices rose on short-covering and amid hopes for deeper output cut by the Organization of the Petroleum Exporting Countries (Opec) and its allies including Russia, a group known as Opec+.
Saudi Arabia's energy minister said on Tuesday he was confident that Opec+ would respond responsibly to the spread of the coronavirus.
Opec+ are due to meet in Vienna over March 5-6. "Opec+ may decide to trigger more supply cuts at next week's meeting, but this may only have a limited effect on oil prices, as demand-side concerns are expected to continue having a major sway on the commodities complex," Han Tan, market analyst at FXTM said.
The International Energy Agency's (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA executive director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.
Growth in US shale oil production will slow sharply over the next two years, the CEO of US oilfield services giant Schlumberger said.
US crude inventories are expected to rise for a fifth week running. The American Petroleum Institute (API) said late on Tuesday that crude stockpiles rose 1.3 million barrels last week.
"Investors are expected to continue to move into safe-haven assets as the impact on economic development in affected countries remains a subject of speculation," Phillip Futures analysts said in a note.
"The market is finding it difficult to look further into the medium term due to uncertainty regarding what the virus will do to the global growth. There are beliefs that central banks may cut rates sooner than later," IG Markets' Mr Rodda added.
The impact of the outbreak on global economic activities increased bets for monetary policy easing by central banks, with US money market futures now fully pricing in a 0.25 percentage point cut by end-June.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion. Reflecting appetite for gold, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.7 per cent to 940.09 tonnes on Tuesday.
Among other precious metals, palladium gained 1.2 per cent to US$2,730.91 per ounce, while platinum rose 0.8 per cent to US$933.49, having touched its lowest in two months on Tuesday. Silver was up 0.6 per cent at US$18.10 an ounce, having fallen as much as 4.1 per cent in the previous session. REUTERS